How this number is made
Yield on cost compares today’s dividend with your old purchase price. It flatters a long-held stock and says nothing about whether the shares are a good buy today. Today’s decision uses today’s price.
- Cost is your basis per share, not today’s quote.
- The dividend is the current annual dividend.
Formula
Yield on cost = current annual dividend ÷ cost basis.
Worked example
With the figures already in the form, yield on cost is 7.75%.
Questions
Should I use this to decide to buy more?
No. New shares are bought at today’s price. Their yield is the ordinary dividend yield.
What if I reinvested?
Your average cost changed. Use the average cost per share, not the first purchase.