Yield on Cost Calculator

What the yield on cost calculator does

The yield on cost calculator shows the dividend income your shares generate measured against the price you originally paid, and compares it with the current yield a new buyer would receive at today's price. From the annual dividend per share, your purchase price, and the current price, you can see how far your income return has moved since you invested.

Market yields are quoted against the live price, but your return is tied to what you paid, and the calculator shows that figure.

Yield on cost explained

Yield on cost divides the annual dividend per share by your original purchase price. If you bought a share for 40 and it now pays 2 a year, your yield on cost is 5 percent, whatever the market does afterwards.

Current yield divides the same dividend by the current market price. If the share now trades at 60, a new buyer paying 60 for a 2 dividend earns a current yield of about 3.33 percent. You both receive the same cash dividend, but your return relative to what each of you paid is very different.

Yield on cost above current yield means the share price has risen since you bought, usually the mark of a successful long-term holding.

What moves yield on cost

• Price appreciation lowers the current yield, because the same dividend is measured against a larger price, while your yield on cost stays put because your denominator is fixed at the purchase price. This is what opens the gap between the two yields.
• Dividend growth raises your yield on cost directly, since your cost basis never changes. A stock bought at a 3 percent starting yield can, after a decade of steady dividend increases, deliver a yield on cost of 6, 8, or even 10 percent on the original outlay.

Together these explain why patient dividend-growth investors often report striking yields on cost: the figure rewards time in the market and a rising payout.

How to use the calculator

1. Enter the annual dividend per share the company currently pays.
2. Enter the price you originally paid for one share.
3. Enter the current market price of one share.

The tool shows your yield on cost, the current yield, and the annual income each share produces, with a bar chart comparing the two yields.

If yield on cost exceeds current yield, your holding has appreciated and you earn more on your cost than the market now offers new buyers. If current yield is larger, the price has fallen since you bought, and a new buyer would receive a better income return than you locked in.

Reading the result in context

Yield on cost looks backward. It shows how well a past decision has aged, not whether the shares are a good buy today. A holding with a spectacular yield on cost might still be worth selling if the business has weakened, and a modest one is no reason to keep a deteriorating company.

Money you invest today buys shares at today's price, so for new capital, current yield and the outlook for dividend growth matter far more. A very high yield on cost often reflects an early, lucky entry price, not a better current opportunity, so judge each position on its present merits.

Common mistakes

• Treating yield on cost as a buy signal. New purchases should be judged on current yield and prospects.
• Ignoring dividend sustainability. A high yield on cost means little if the payout is about to be cut; check that earnings comfortably cover the dividend.
• Forgetting total return. A share can have an excellent yield on cost while its price stagnates; capital growth and dividends together define your outcome.

Use the calculator to review your dividend holdings from time to time and to compare the return you locked in with what the market offers now, alongside a look at each company's health.

This article is general information only and is not financial advice.

About This Yield on Cost Calculator

Use this yield on cost calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.