Measuring performance
Yield on cost
Also called YOC
The dividend a holding pays now, measured against what you originally paid for it rather than what it is worth today.
How it works
The denominator never moves. Buy at $20 while the dividend is $0.60 and the yield is 3%; hold while the price doubles and the dividend grows to $0.90, and the yield on cost reads 4.5% — because it is still dividing by the $20 you paid years ago.
That makes it a statement about a decision already taken, not about the money in front of you. What today’s money earns is the current yield, measured against today’s price, and every buyer gets the same one — including you, if you buy more of the same holding.
Where it misleads people
It only ever flatters you, and it rises with nothing but time. A high yield on cost cannot be compared with the yield on anything you are weighing up now, because that is quoted against today’s price — and holding an investment because "it yields 4.5% for me" is comparing your past purchase with someone else’s present one.
Formula
Yield on cost = annual dividend per share ÷ price you originally paid per shareWorked example
You paid $20 a share when the dividend was $0.60, a 3% yield. Ten years later the dividend is $0.90 and the share trades at $45. Yield on cost = 0.90 ÷ 20 = 4.5%. Current yield = 0.90 ÷ 45 = 2%. Same holding, same day, same dividend.
Related terms
- Dividend yieldAnnual dividends per share as a percentage of the share price.
- Current yieldA bond’s annual coupon divided by its current market price.
- Cost basisWhat you actually paid for a holding, including fees — the number every gain or loss is measured from.
- Total returnThe full return from an investment: price change plus every dividend or interest payment received.
More in Measuring performance
- Annualised
- Unrealised profit and loss
- Backtest
- Tracking error
- Behaviour gap
- Tracking difference
- Benchmark
- CAGR
All 29 Measuring performance terms · The full glossary, 433 terms
Educational reference only. Nothing here is investment advice or a recommendation to buy or sell anything, and tax treatment depends on your own circumstances and the country you are in.