Yield on Cost Calculator
Your real dividend yield is based on what you paid, not today's price. See your yield on cost now and how dividend growth lifts it over the years. Instant, no sign-up, formula shown.
Quick answer
A share bought at $50 paying $2.00 a year yields 4.00% on cost today. If that dividend grows 7% a year, the dividend reaches $7.74 a share and your yield on cost climbs to 15.48% after 20 years — because the cost in the denominator never changes. Change the inputs above and this answer updates with your own numbers.
Your yield on cost, climbing over time
Each dividend raise lifts the return on the price you originally paid — the current buyer's yield never moves like this.
Yield on cost & income by year
The same shares, the same cost — a rising effective yield and a growing paycheck.
| Time held | Yield on cost | Annual income |
|---|
What is yield on cost?
Yield on cost is the annual dividend a share pays now, divided by what you paid for it — not by what it trades at today. It answers a specific question: what is this position paying me on the money I actually committed?
Because the denominator is frozen at your purchase price while the numerator grows with every dividend increase, yield on cost rises over time on its own. That is the entire mechanism, and it is why long-term dividend investors track it.
It is not the yield anyone buying today would receive. That is current yield, and it uses today's price. The two answer different questions and are constantly confused — see the comparison below.
What is a good yield on cost?
There is no universal threshold, and any article giving you one is selling certainty it does not have. What a yield on cost figure is good relative to depends on three things: how long you have held, what you started at, and what the alternative was.
Some honest reference points:
- Compared with your starting yield. This is the only comparison the number is really built for. A 4% starting yield that has become 7.9% means the dividend has roughly doubled — that is the dividend growth thesis working. A 4% that has become 4.3% after a decade means it is not.
- Compared with what a new buyer gets today. If your yield on cost is 15% and the stock's current yield is 3%, you are being paid five times what a buyer today would receive on the same shares.
- Compared with risk-free rates. A yield on cost below what Treasuries pay is a signal worth sitting with, because you took equity risk for it.
What makes a yield on cost genuinely good is the growth rate that produced it, not the number itself. Here is the same 4% starting yield after 20 years, varying only the dividend growth rate:
| Dividend growth | Yield on cost after 20 years | Dividend doubles every |
|---|---|---|
| 3% a year | 7.22% | 23.4 years |
| 5% a year | 10.61% | 14.2 years |
| 7% a year | 15.48% | 10.2 years |
| 9% a year | 22.42% | 8.0 years |
| 11% a year | 32.25% | 6.6 years |
Same starting yield, same 20 years, and the outcome ranges from 7.2% to 32.3%. The growth rate did all of it.
How does yield on cost change over time?
It compounds. Each dividend increase raises the numerator while your cost stays fixed, so the yield curve bends upward — slowly at first, then noticeably.
| Years held | Yield on cost |
|---|---|
| 0 (today) | 4.00% |
| 5 | 5.61% |
| 10 | 7.87% |
| 15 | 11.04% |
| 20 | 15.48% |
| 25 | 21.71% |
| 30 | 30.45% |
A 4% yield growing at 7% a year takes about a decade to reach 8% and another decade to reach 15%. This is why yield on cost is a patience metric: for the first several years it looks unremarkable, and there is no way to hurry it.
The rule of thumb worth remembering: at a given growth rate the dividend doubles every ln(2) ÷ ln(1 + g) years — about 10 years at 7% growth, about 7 years at 11%.
Yield on cost vs current dividend yield
| Yield on cost | Current yield | |
|---|---|---|
| Denominator | What you paid | Today's share price |
| Question it answers | What is this paying me on my money? | What would a buyer get today? |
| Changes when the price moves | No | Yes |
| Changes when the dividend moves | Yes | Yes |
| Useful for | Tracking a long-held position's income | Comparing investments you could buy now |
| Useless for | Deciding whether to buy or hold today | Showing what your own position pays you |
The critical line in that table is the last one. Yield on cost cannot tell you whether to keep holding. The money in the position is worth its current market value, not the price you once paid, so the decision to hold or sell must be made on current yield and current prospects. Your purchase price is a fact about your past, not about the investment.
Where yield on cost misleads people
A high yield on cost feels like an achievement, and it is genuinely useful for tracking whether a dividend-growth thesis is working. But it can be gamed by time alone: hold anything with a rising dividend for long enough and the number gets impressive, regardless of whether the investment was good.
The clearest demonstration — three strategies, $100 invested in each, held 20 years:
| Strategy | Yield on cost after 20 years | Total dividends actually collected |
|---|---|---|
| 6% starting yield, 2% growth | 8.92% | $149 |
| 4% starting yield, 7% growth | 15.48% | $175 |
| 2% starting yield, 12% growth | 19.29% | $161 |
Look carefully at the last row. It produces the highest yield on cost of the three — and it is not the strategy that paid the most money. The middle row collected $175 against the winner's $161, because it was paying more throughout the years when the high-growth option was still paying very little.
That is the trap in one table: yield on cost tells you where the dividend ended up, not how much cash reached your account along the way. Both matter, and only one of them is a yield.
The yield on cost formula
- D0 — annual dividend per share today
- g — annual dividend growth rate
- n — years held from today
- P — the price you paid per share, which never changes
Set n to zero and it collapses to the plain version: current dividend divided by your cost. Everything interesting comes from the exponent.
See the formula with your own numbers
These update live from the calculator inputs above.
Example: 100 shares bought at $50
You buy 100 shares at $50, a total of $5,000. The company pays $2.00 a share annually and has raised it about 7% a year.
- Today: $2.00 ÷ $50 = 4.00% yield on cost, paying $200 a year.
- After 10 years: the dividend has grown to about $3.93 a share — 7.87% on cost, roughly $393 a year.
- After 20 years: about $7.74 a share — 15.48% on cost, roughly $774 a year from the same $5,000.
Nothing was added to the position. The income nearly quadrupled because the dividend did, and the denominator stayed at $50 forever. That is the whole appeal — and the reason it takes twenty years to look impressive.
Frequently asked questions
What is a good yield on cost?
There is no fixed threshold, and the useful comparison is against your own starting yield rather than someone else's number. A 4% starting yield that has reached about 7.9% means the dividend has roughly doubled, which is the growth thesis working; a 4% that has barely moved after ten years means it is not. What actually determines the outcome is the dividend growth rate: the same 4% start becomes 7.22% at 3% growth and 32.25% at 11% growth over twenty years.
How do you calculate yield on cost?
Divide the current annual dividend per share by the price you originally paid per share, then multiply by 100. To project it forward, grow the dividend first: YOC = D×(1+g)n ÷ P, where g is the dividend growth rate and n is years. Your purchase price never changes in the denominator, which is what makes the figure climb.
What is the difference between yield on cost and current yield?
The denominator. Yield on cost divides by what you paid; current yield divides by today's price. Yield on cost describes your own position's income; current yield describes what any buyer would get today. Only current yield is relevant to a buy or sell decision, because the capital tied up in the position is worth today's price, not the price you once paid.
Does yield on cost change when the share price changes?
No. That is the defining feature. Your cost is fixed at purchase, so the share price can double or halve and your yield on cost is unmoved. It changes only when the dividend changes — up on a raise, down on a cut.
Is a high yield on cost always good?
No, and this is the most common mistake. Time alone inflates it: hold anything with a rising dividend long enough and the figure looks impressive. A 2% starting yield growing 12% a year reaches a higher yield on cost after twenty years than a 4% yield growing 7% — yet it pays out less cash in total over the period, because it was paying so little in the early years.
How long does it take yield on cost to double?
The dividend doubles in ln(2) ÷ ln(1 + g) years, and yield on cost doubles with it because the denominator is fixed. At 7% growth that is about 10.2 years; at 11% about 6.6 years; at 3% about 23.4 years.
Should I use yield on cost to decide whether to sell?
No. The position is worth its current market value, so a hold-or-sell decision belongs to current yield, valuation and prospects. A high yield on cost is a record of what happened, and treating it as a reason to keep holding is the sunk-cost fallacy wearing a percentage sign.
Method & sources
- Calculation: YOC = annual dividend ÷ original price; projected with constant annual dividend growth (shown above). Verified against an independent test suite.
- Yield on cost is a widely used dividend-investing metric; it measures return on your cost basis, not current market yield.
- Reviewed: · Assumptions reviewed quarterly.
Educational estimate, not financial advice. Dividends can be cut and are not guaranteed.
Run your own numbers
Enter what you paid, what it pays now and how fast the dividend has been growing — and see where your yield on cost lands in five, ten and twenty years.
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