Yield on cost (YOC) - Definition

Yield on cost is a measurement of the Amount of return investors get from the dividends on a particular security. Dividends are bonus payments made to investors to reward them for their loyalty, and they are also used by companies to lure new investors. The yield on cost is measured by dividing the dividend per share of a particular stock by the cost per share paid by the investor. It is important to realize that the yield is dependent upon the share price of the security, which can rise and fall over time.

As an example of yield on cost, imagine that an investor bought 100 shares of stock at a price of a $20 US Dollars (USD) per share. The company that issues the stock pays out a dividend at the end of the year of $1 USD for every share owned. Dividing $1 USD by $20 USD yields a quotient of .05. By converting this into a percentage, it can be determined that the stock yields 5 percent.

The reason that patience and discipline are such strong virtues of the dividend growth investor is because of yield on cost. Once you've purchased a dividend paying stock, you will be receiving the dividend yield as it was on the date of purchase. Each time that company raises their dividend, your yield on cost will increase, meaning more money in your pocket from dividend income. After years of dividend growth your yield on cost could be in the double digits, beating the market each year with just dividends alone.

Terms near "Yield on cost (YOC)"

Yield to Call (YTC)
Yield to Maturity (YTM)
Yield to Worst (YTW)
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