Your brokerage shows you the current dividend yield. But that number doesn't tell you the most important thing: what return are you actually earning on the money you invested?
That's what yield on cost (YOC) measures. And it's the number that separates patient dividend investors from everyone else.
In this guide, you'll learn exactly what yield on cost is, how to calculate yield on cost with the formula, see real-world examples, and use our free Yield on Cost Calculator to see your true returns.
What Is Yield on Cost?
Yield on cost is your dividend yield based on what you actually paid for a stock — not what it trades for today.
The Formula
$$
\text{Yield on Cost} = \frac{\text{Current Annual Dividend Per Share}}{\text{Original Purchase Price Per Share}} \times 100
$$
A Simple Example
You bought Johnson & Johnson (JNJ) at $100 per share in 2020. Today, JNJ pays $4.96/year in dividends.
- Current yield (based on today's
$160 price): 3.1%
- Your yield on cost (based on your
$100 purchase): 4.96%
Your money is earning nearly 5% — even though new buyers only get 3.1%. That's the reward for buying quality and holding.
→ Calculate Your Yield on Cost
How to Use the YOC Calculator
Step 1: Enter Your Purchase Price
The price you originally paid per share. If you bought at different times, use your average cost basis.
Step 2: Enter the Current Annual Dividend
The total annual dividend per share the company pays today. You can find this on any financial site or in DividendPro.
Step 3: See Your Results
The calculator instantly shows:
- Your yield on cost — your true return percentage
- Current market yield — what new buyers get
- The YOC advantage — how much more you're earning
- Income per share — your annual cash flow per share owned
Why Yield on Cost Matters
It Reveals the Power of Time
Current yield is a snapshot. Yield on cost tells a story — the story of what happens when you buy quality dividend growers and hold.
Here's what happens to a $50 stock with a 3% starting yield that grows its dividend by 7% annually:
| Year | Annual Dividend | Current Yield* | Your YOC |
|---|
| 0 | $1.50 | 3.0% | 3.0% |
| 5 | $2.10 | 3.0% | 4.2% |
| 10 | $2.95 | 3.0% | 5.9% |
| 15 | $4.14 | 3.0% | 8.3% |
| 20 | $5.80 | 3.0% | 11.6% |
| 25 | $8.13 | 3.0% | 16.3% |
Assuming price grows in line with dividends to keep current yield at 3%
After 25 years, you're earning 16.3% annually on your original investment — just from dividends. And you haven't sold a single share.
It Keeps You Focused on What Matters
When the market drops 20%, your yield on cost doesn't change. Your dividends keep coming. YOC reminds you that you're being paid based on your purchase price, not today's market price.
This mental shift is what separates successful dividend investors from those who panic-sell during corrections.
It Proves Dividend Growth Compounding
Two stocks with identical current yields can have dramatically different YOC profiles:
| Stock A (Low Growth) | Stock B (High Growth) |
|---|
| Purchase price | $50 | $50 |
| Starting yield | 5.0% | 2.5% |
| Dividend growth | 2%/year | 10%/year |
| YOC after 10 years | 6.1% | 6.5% |
| YOC after 20 years | 7.4% | 16.8% |
Stock B started with HALF the yield but overtakes Stock A by year 10 and crushes it by year 20. The YOC calculator helps you model scenarios like this before you buy.
Real-World YOC Examples
Coca-Cola (KO) — Bought in 2010
- 2010 purchase price: ~
$28
- 2026 annual dividend:
$2.04
- Current yield: 2.7% (at ~
$75 stock price)
- Yield on cost: 7.3%
A 2010 buyer is earning 7.3% on their money in dividends alone — plus the stock has nearly tripled.
Realty Income (O) — Bought in 2015
- 2015 purchase price: ~
$48
- 2026 annual dividend:
$3.16
- Current yield: 5.5% (at ~
$57 stock price)
- Yield on cost: 6.6%
Even a REIT that hasn't seen huge price appreciation delivers strong YOC when the dividend keeps growing.
Apple (AAPL) — Bought in 2016
- 2016 purchase price: ~
$26 (split-adjusted)
- 2026 annual dividend:
$1.04
- Current yield: 0.5% (at ~
$210 stock price)
- Yield on cost: 4.0%
Apple's current yield looks tiny. But early buyers are earning 4% YOC — on a stock that has also 8x'd in price.
YOC Calculator Strategies
1. Track YOC for Every Holding
Don't just check yields on a financial site. Calculate YOC for each stock in your portfolio. You'll be surprised which positions are your best performers on a cost-basis return.
Use DividendPro to automatically track YOC across your entire portfolio — it calculates this for every holding in real time.
2. Use YOC to Evaluate Sells
Thinking about selling a stock? Check your YOC first. If you're earning 8% yield on cost from a stock you bought years ago, selling means giving up that income stream. Any replacement stock starts back at current market yield.
3. Model Future YOC Before Buying
Before you buy a stock, run the YOC calculator with these inputs:
- Today's price as purchase price
- Current dividend
- Expected dividend growth rate
This shows you what your YOC will look like in 5, 10, and 20 years. It helps you compare a 5% yield/0% growth stock against a 2.5% yield/10% growth stock.
4. Compare YOC Across Your Portfolio
Rank your holdings by yield on cost. This reveals:
- Which stocks have rewarded you most over time
- Which aren't growing dividends fast enough
- Where to add more capital for the best long-term returns
YOC vs. Other Yield Metrics
| Metric | What It Measures | When to Use |
|---|
| Current yield | Dividend ÷ today's price | Comparing stocks you don't own yet |
| Yield on cost | Dividend ÷ your purchase price | Evaluating your actual return |
| Forward yield | Expected next-year dividend ÷ price | Projecting near-term income |
| Trailing yield | Last 12 months of dividends ÷ price | Historical income measurement |
YOC is the only one that's personal to YOU. It reflects your entry point and rewards patience.
Common YOC Mistakes
Mistake 1: Chasing High Current Yield
A 7% yield that never grows will always be 7% YOC. A 3% yield growing at 8% per year becomes 6.5% YOC in just 10 years and 14% in 20 years. Use the calculator to see the difference.
Mistake 2: Ignoring Dividend Growth Rate
YOC only improves if the company raises its dividend. Check whether your holdings are growing dividends consistently. The Dividend Aristocrats have done this for 25+ consecutive years.
Mistake 3: Not Accounting for DRIP
If you're reinvesting dividends, your YOC calculation gets more complex — each reinvested purchase has its own cost basis. Use DividendPro to automatically track this, or model the combined effect with our DRIP calculator.
Start Tracking Your Real Returns
Current yield tells you what new money earns today. Yield on cost tells you what YOUR money is actually earning.
Run your numbers in the free Yield on Cost Calculator, then add your portfolio to DividendPro for automatic YOC tracking across all your holdings.
→ Calculate Your Yield on Cost Now
Frequently Asked Questions About Yield on Cost
What is yield on cost in simple terms?
Yield on cost (YOC) is your dividend yield based on what you originally paid for a stock, not what it trades for today. If you bought a stock at $50 and it now pays $3/year in dividends, your yield on cost is 6% — even if the stock now trades at $100 (where new buyers only get 3%).
How do you calculate yield on cost?
The yield on cost formula is:
$$
\text{Yield on Cost} = \frac{\text{Current Annual Dividend Per Share}}{\text{Original Purchase Price Per Share}} \times 100
$$
For example: You bought at $40, current annual dividend is $2.00. YOC = ($2.00 ÷ $40) × 100 = 5.0%.
Is a high yield on cost good?
Yes! A high yield on cost means you're earning a large return on your original investment through dividends alone. Long-term holders of quality dividend growers often see YOC of 6-15%+ on their original purchase price. This is the reward for buying early and holding patiently.
What is a good yield on cost percentage?
Anything above the stock's current market yield is a "win." For reference:
- 3-5% YOC — Solid, typical after 5-10 years of holding a dividend grower
- 5-8% YOC — Excellent, usually 10-15 years of holding
- 8-15%+ YOC — Outstanding, typically 15-25+ years of patient holding
Does yield on cost change if the stock price changes?
No! That's the beauty of YOC. It only changes when the dividend changes — not the stock price. If the market drops 30%, your YOC stays the same because it's based on YOUR purchase price and the current dividend. This makes YOC a grounding metric during market volatility.
How is yield on cost different from current yield?
Current yield = annual dividend ÷ today's stock price (what new buyers get). Yield on cost = annual dividend ÷ your purchase price (what you're actually earning). Current yield is the same for everyone; YOC is personal to your entry point.
Should I sell a stock with high yield on cost?
Be cautious. If you sell a stock where you're earning 10% YOC, any replacement investment starts at the current market yield (typically 2-4%). You'd be giving up a high-income stream that took years to build. Only sell if the company's fundamentals have deteriorated or the dividend is at risk.
How do I calculate yield on cost with multiple purchases?
If you bought shares at different times and prices, use your average cost basis as the purchase price. Most brokerages calculate this for you. Then divide the current annual dividend by that average cost. DividendPro tracks this automatically across all your holdings.
Does DRIP affect yield on cost?
Yes. When you reinvest dividends, each reinvestment creates a new "purchase" at that day's price, which changes your average cost basis. This makes the calculation more complex. Use DividendPro to automatically track YOC with DRIP, or model the combined effect using our DRIP calculator.
Related Resources:
- Yield on Cost Calculator — Calculate your true dividend return
- DRIP Calculator — See how reinvestment compounds your wealth
- Free DRIP Calculator Guide — Detailed walkthrough with examples
- Complete Dividend Aristocrats List 2026 — 25+ years of consecutive dividend growth
- Dividend Income Calculator — Plan your path to passive income
- The Power of DRIP Investing — Why reinvestment matters
