How do you calculate dividend yield on cost?

To calculate dividend yield on cost, first find your total cost basis (price paid per share times number of shares, plus any commissions). Then compute the current annual dividend per share and multiply by the number of shares to get annual dividend income. Finally, divide annual dividend income by your cost basis and multiply by 100 to express it as a percentage.

What is the difference between yield and yield on cost?

Current yield uses the current market price in the denominator, while yield on cost uses your original purchase cost. Current yield tells you what a new investor would earn today, whereas yield on cost tells you what you are earning relative to what you originally paid. Over time, dividend growth can make yield on cost much higher than the current yield.

Is a high yield on cost always good?

A high yield on cost can indicate that your income has grown significantly relative to what you paid, often due to dividend growth or rent increases. However, it can also hide risk if the underlying asset is now overvalued or if the payout is unsustainably high. You should always look at fundamentals, payout ratios, and current yield, not just yield on cost.

How is yield on cost used in real estate?

In real estate, yield on cost is usually defined as net operating income (NOI) divided by total project cost, including land, construction, soft costs, and leasing costs. Developers use it to compare the stabilized income of a project to what it cost to build, and to compare that return to market cap rates or required return thresholds.

Yield on Cost Calculator

Q: What is yield on cost?

Yield on cost (YOC) is the annual cash income from an investment divided by the original amount you invested. For dividend stocks, it is the current annual dividend per share times the number of shares, divided by your total purchase cost. For real estate, it is typically net operating income divided by total development or acquisition cost.

Calculate dividend yield on cost and real estate yield on cost, compare with current yield, and model future income growth.

Yield on Cost Inputs

Mode

Total cost basis ($)

Include purchase price, commissions, and fees.

Number of shares

Optional – used to derive dividend per share.

Annual dividend income ($)

Total annual dividends you receive today.

Current market value ($)

Used to compute current yield.

Expected annual dividend growth (%)

Optional – for forward yield on cost.

Years in the future

Projection horizon for forward YOC.

Results

Yield on Cost

Locked-in

–

Annual income ÷ original cost.

Current Yield

Market

–

Annual income ÷ current value.

Forward Yield on Cost

Projected

–

Assuming constant growth over the selected years.

Income Today

–

Annual cash income based on your inputs.

Quick Scenario Table (Dividend Growth)

See how different dividend growth rates affect your future yield on cost.

Growth rate	YOC in 5 years	YOC in 10 years

What is yield on cost?

Yield on cost (YOC) measures the cash income you receive from an investment relative to what you originally paid for it. It is especially popular with dividend investors and real estate developers who focus on growing income over time.

General formula

\[ \text{Yield on Cost (YOC)} = \frac{\text{Annual Cash Income}}{\text{Original Cost Basis}} \times 100 \]

Where:

Annual cash income = dividends, distributions, or net operating income (NOI).
Original cost basis = total amount you invested, including fees and capital improvements.

Dividend yield on cost (stocks)

For dividend stocks, yield on cost is:

\[ \text{Dividend YOC} = \frac{\text{Current Annual Dividend per Share} \times \text{Number of Shares}}{\text{Total Cost Basis}} \times 100 \]

Example:

You bought 200 shares at $40 = $8,000 total cost.
The stock now pays $1.50 per share annually (total dividends = $300).
Your yield on cost is $ 300 / 8{,}000 = 3.75\% $.

Yield on cost in real estate

In real estate, yield on cost is often defined as NOI divided by total project cost:

\[ \text{Real Estate YOC} = \frac{\text{Net Operating Income (NOI)}}{\text{Total Development or Acquisition Cost}} \times 100 \]

Developers compare this to the market capitalization rate (cap rate). If your yield on cost is higher than the market cap rate, the project may create value because it can be sold at a lower yield (higher price) than it cost to build.

Yield on cost vs current yield

It is important to distinguish yield on cost from current yield:

Yield on cost uses your original cost in the denominator.
Current yield uses the current market value in the denominator.

Current yield

\[ \text{Current Yield} = \frac{\text{Annual Cash Income}}{\text{Current Market Value}} \times 100 \]

Yield on cost tells you what you are earning on the money you originally put at risk. Current yield tells you what a new investor would earn if they bought the asset today.

When yield on cost is useful

Tracking progress of a dividend growth or income strategy over many years.
Comparing different investments you made at different times.
Evaluating whether a development project’s stabilized income justifies its cost.

However, yield on cost should not be the only metric you use. For decisions about buying, selling, or reallocating capital, current yield and total return are usually more relevant.

How this yield on cost calculator works

Select Dividend stock or Real estate mode.
Enter your cost basis and current annual income (dividends or NOI).
Optionally add current value to see current yield.
Optionally add a growth rate and years to project forward yield on cost.
Review the comparison note to see how your locked-in yield compares to the market.

Limitations and best practices

Yield on cost ignores unrealized gains or losses in the asset’s price.
It does not account for taxes, inflation, or changes in risk.
For real estate, use NOI, not cash flow after debt service, to keep it comparable to cap rates.
Use yield on cost alongside other metrics: total return, payout ratio, debt levels, and growth sustainability.

Yield on Cost FAQs

Is yield on cost a good metric for deciding whether to sell?

Not really. Yield on cost is backward-looking because it is anchored to what you paid in the past. When deciding whether to sell, you should focus on the asset’s current fundamentals, valuation, and opportunity cost compared with alternatives. Current yield and expected total return are more decision-relevant than yield on cost.

What is a “good” yield on cost?

A good yield on cost depends on your risk tolerance and investment strategy. Many dividend investors aim to grow their yield on cost into the high single digits or low double digits over time through dividend growth. In real estate, developers often target a yield on cost that is at least 100–200 basis points above the market cap rate to justify the project risk.

How does dividend reinvestment affect yield on cost?

If you reinvest dividends into more shares, your cost basis increases, but so does your future income. The calculator assumes a fixed cost basis; if you reinvest, you can treat each reinvestment as an additional mini-investment with its own yield on cost, or track a blended cost basis over time.

Can yield on cost be negative?

Yield on cost itself cannot be negative because it is based on cash income, which is zero or positive. However, your total return can be negative if the asset price falls more than the income you receive. That is why yield on cost should not be confused with overall investment performance.