Yield on Cost Calculator

What dividend yield on cost measures

Yield on cost is the annual dividend a stock pays today divided by the price you paid for it. The number is personal. Two investors who own the same shares can show different yields on cost because they bought at different prices. The SEC investor glossary defines a dividend as a share of company profit paid to shareholders, which is the cash flow this page works with.

The question it answers is narrow and useful: how much income is my original money throwing off now? If you put $5,000 into 100 shares at $50 and the company pays $3.20 a share, you collect $320 a year. Divide $320 by $5,000 and you get 6.40%. That is your yield on cost.

Current dividend yield asks a different question. It divides the same $3.20 by the price today. At $80 a share, the current yield is 4.00%. The 2.40 point gap does not mean anyone is handing you extra money. It means your purchase price is fixed while the market price moved.

Long-term owners track yield on cost because it shows how much their income stream has grown against a cost that never changes. It is a record of the past, not a forecast of the next 12 months.

The yield on cost formula and a worked example

The per-share version is yield on cost = (current annual dividend per share / original purchase price per share) x 100. The portfolio version swaps in totals: annual dividend income / total cost basis x 100. Both give the same answer when the totals come from the same shares.

Worked example. You own 250 shares bought at $36.40, so your cost basis is $9,100. The company pays $1.92 a share, or $480 a year. $480 / $9,100 = 5.27%. The stock trades at $52.10, so the current yield is $1.92 / $52.10 = 3.69%. Your income has not changed, but a new buyer pays more for the same dividend.

Use the forward annual dividend, meaning the amount expected over the next four quarters. A trailing figure that includes a one-time special dividend will overstate the result. If the company pays quarterly, take the latest regular payment times four, then adjust for an announced increase or cut. A stock with a $0.48 quarterly dividend has a $1.92 annual rate.

Cost basis per share should include the commission you paid, spread across the shares. On a $9.10 commission for 250 shares, add $0.0364 a share and the basis becomes $36.4364. The effect is small on a long hold, but it keeps the number honest.

Yield on cost vs current dividend yield

Yield on cost and current yield use the same dividend and different denominators. The table shows four positions bought at different prices.

Stock B shows the trap in the metric. It was bought at $120 and now trades at $95, so its yield on cost is only 4.00% while a new buyer gets 5.05%. Stock C was bought at $28 and now trades at $61, so its yield on cost is 3.93% while the current yield is 1.80%. Neither number says the business is good or bad. They say when you bought.

For decisions about new money, current yield is the relevant figure because it is the yield available at today's price. For tracking the income your capital has produced, yield on cost is the relevant figure. Mixing the two is how people talk themselves into holding a poor investment because their yield on cost looks high.

Projecting yield on cost with dividend growth

If the dividend grows, yield on cost rises even when the share price does nothing. The formula is future yield on cost = (initial annual dividend x (1 + growth rate)^years) / cost basis. The growth rate is an assumption, not a promise.

Take the 100 shares bought at $50 with a $3.20 dividend. At 6% annual growth, the dividend reaches $4.28 in five years, $5.73 in ten, $7.67 in fifteen and $10.26 in twenty. Yield on cost follows: 8.56%, 11.46%, 15.34% and 20.53%.

The income column matters more than the percentage for most households. A 20.53% yield on cost sounds large, but on 100 shares it pays $1,026.28 a year. On a $100,000 position the same growth would pay $20,528 a year, which is the number that changes a retirement budget.

The model fails when growth is uneven. A company that raises the dividend 10% some years and freezes it in others will not land on the smooth curve. Use a conservative rate and rerun the page with 0% growth to see the floor.

Using total dividends and total cost basis

For a portfolio, add the annual dividends from every holding and divide by the total cost basis. Do not average the individual yields. A small position with a high yield cannot lift a large position with a low one by much.

The simple average of 6.40%, 3.50% and 6.50% is 5.47%. The money-weighted answer is 5.06% because the largest holding has the lowest yield. The calculator's second pair of fields does this division for you.

Dividend reinvestment complicates the basis. Each reinvested payment buys new shares at a new price, and those shares have their own yield on cost. Your broker's cost basis report includes reinvested dividends, so the portfolio figure from those totals is a blended number. Keep a separate figure for the original shares if you want to track the income growth on your first purchase.

What yield on cost does not tell you

Yield on cost ignores price changes. A stock that fell 40% can show a yield on cost of 8% while a new buyer sees 13%. The 8% is real cash, but the position may still be a loss. Total return includes the price change, and this page does not.

It also moves when the dividend moves. The calculation uses the current dividend, so a 30% cut drops the yield on cost by 30% in one step. That is why a high figure deserves a look at the payout ratio and free cash flow before you treat it as durable.

Taxes are missing. A 5% yield on cost in a taxable account is not 5% after tax, and qualified dividends get different treatment than interest. The IRS explains the holding period and rates in Topic 404. Inflation is missing too. A 6% yield on cost after ten years of 3% inflation buys less than it did at the start.

Finally, the number is not comparable across investors or across accounts. Your 6.40% and a neighbor's 4.10% may reflect purchase dates, not skill. Use it on your own history.

How to use yield on cost without fooling yourself

Keep a lot-level record. A simple sheet with columns for purchase date, shares, price per share, annual dividend per share and current value is enough. Recompute once a year. The exercise takes ten minutes and shows which holdings are growing their income.

Check the payout ratio before you admire a high yield on cost. A company paying 90% of earnings in dividends has little room to keep raising the payment. A payout ratio near 50% with rising free cash flow is a better sign. A yield above 7% at today's price often signals that the market expects a cut.

Reinvest the dividends if you do not need the income. Reinvestment buys more shares, which raises future income, but it also raises your cost basis and lowers the blended yield on cost. That is not a loss. You own more of the company.

Compare the yield on cost with the current yield once a year. A widening gap means the stock price has risen faster than the dividend, which is a sign of a winner but also a lower forward yield. A narrowing gap means the price fell or the dividend grew slowly. Neither case tells you to buy or sell on its own.

A 10-year walk-through for a real holding

Here is a holding followed for ten years. You bought 300 shares at $41.25 for $12,375. The dividend then was $2.31 a share, or $693 a year, for a yield on cost of 5.60%.

The company raised the dividend 5% a year. By year ten the payment is $3.7627 a share. The yield on cost is $3.7627 / $41.25 = 9.12%, and the income is $1,128.82. The shares trade at $74, so a new buyer gets 3.12%. Your income rose 63% while your cost basis stayed at $12,375.

Now suppose you reinvested every payment at the price on the payment date. Your share count would be higher than 300 and your cost basis would include the reinvested cash. The original 300 shares still earn 9.12% on their $12,375. The reinvested shares earn whatever the price at reinvestment implies. Tracking the two groups separately keeps the story clear.

The lesson is not that this stock was a good buy. It is that a 5% dividend growth rate turned a 5.60% starting yield into 9.12% in a decade, before taxes and inflation. Rerun the calculator with 2% growth and the same holding reaches 6.83% instead.