Yield on Cost (YOC)

Yield on Cost (YOC) measures your dividend yield based on what you actually paid for a stock, not its current price. For long-term dividend growth investors, YOC often tells a more meaningful story than current yield.

Formula: YOC = (Current Annual Dividend / Original Purchase Price) × 100

Why YOC Matters:

• Shows your true income return on investment
• Rewards long-term dividend growth investing
• Demonstrates the power of dividend increases over time
• More relevant than current yield for existing positions

Example: Johnson & Johnson (JNJ)

Metric	2010	2024
Purchase Price	$60	(bought in 2010)
Annual Dividend	$2.16	$4.96
Yield at Purchase	3.6%	-
Current YOC	-	8.3%

You're earning 8.3% on your original investment vs. the current yield of ~3%.

YOC Growth Examples:

Years Held	Dividend Growth Rate	Starting 3% Yield Becomes
5 years	7%/year	4.2% YOC
10 years	7%/year	5.9% YOC
20 years	7%/year	11.6% YOC
30 years	7%/year	22.8% YOC

Important Considerations:

• YOC ignores opportunity cost (capital could be elsewhere)
• High YOC doesn't mean hold forever if better opportunities exist
• Factor in total return, not just YOC
• Can distort analysis of portfolio allocations

Best Used For:

• Evaluating long-term dividend growth strategy success
• Comparing income from different purchase dates
• Motivating continued dividend reinvestment