Dividend Yield vs Yield on Cost

⚡In 30 seconds

  • •Understand the difference between current yield and yield on cost.
  • •Uses 1 calculator(s) for hands-on examples

Dividend investors often cite yield numbers, but "yield" can mean different things. Understanding the difference between current yield and yield on cost helps you evaluate your investments accurately.

Current Dividend Yield

Annual dividend divided by current market price.

Changes constantly as stock prices fluctuate.

Useful for comparing investments at today's prices.

Yield on Cost (YOC)

Annual dividend divided by your original purchase price.

Personal metric that reflects your actual income vs investment.

Can be very high for long-held positions with dividend growth.

Which Metric to Use?

Use current yield when comparing new investment opportunities.

Use YOC to track your personal return on investment.

High YOC can be satisfying but shouldn't prevent selling if fundamentals deteriorate.

Example: Stock Bought at $50, Now $100

You bought a stock at $50, it now trades at $100, and pays $4 annual dividend.

  • 1.Current yield: $4 ÷ $100 = 4%
  • 2.Yield on cost: $4 ÷ $50 = 8%
  • 3.Both are correct—they measure different things
Calculate your dividend yield →

FAQ

Is a high YOC always good?

Not necessarily. If you would not buy the stock today, selling and reinvesting might provide better future income.

Key Terms

Dividend YieldAnnual dividend divided by stock price, expressed ...Yield on CostDividend yield calculated using your original purc...DividendA payment made by a company to shareholders from i...

Tools & Resources

→ Dividend Income Calculator← Back to Guides→ Investment Glossary