Yield on cost (also called dividend yield on cost) is the annual dividend a share pays today divided by the price you originally paid for it, shown as a percentage. It answers the question "how much cash does this holding pay me each year, compared with the money I put in?" It is different from the current dividend yield, which divides the same dividend by today's share price. When a company raises its dividend over the years, yield on cost keeps climbing, even if the current yield stays flat. The figure is personal: two people holding the same share can have different yields on cost, because they paid different prices.
Worked example
Say you bought one share of Company A at $40, when it paid $1.20 a year, a yield of 3% ($1.20 ÷ $40). Years later the company pays $3.00 a year and the share trades at $100. Yield on cost = $3.00 ÷ $40 = 7.5%. Current dividend yield = $3.00 ÷ $100 = 3%. Both are correct, but they answer different questions: 7.5% is what the cash payment looks like against what you paid, while 3% is what a new buyer gets today. The share you hold is now worth $100, so that is the money actually tied up in it.
Why it matters
Yield on cost is a handy way to see how a growing dividend has paid off against your own purchase price, and it needs only two numbers you already know: the dividend and what you paid. The catch is that it looks backwards. It ignores what the holding is worth now, so a high yield on cost can make a position look better than it is, for example when the share has risen a lot and the same money could be earning more elsewhere, or when the dividend is about to be cut. It also says nothing about whether the dividend is safe. Read it next to the current dividend yield and the payout ratio, and treat a big gap between the two yields as a question to look into, not a verdict.
Frequently asked questions
Divide the annual dividend per share you receive today by the price per share you originally paid, then multiply by 100. For example, a $3.00 dividend on a share bought at $40 gives $3.00 ÷ $40 = 7.5%.
Both use the same annual dividend. Yield on cost divides it by the price you paid, so it is personal and rises as the dividend grows. Dividend yield divides it by today's share price, so it is the same for everyone and shows what a new buyer would get.
It only shows that the dividend has grown compared with your purchase price. It does not say whether the dividend is safe or whether the holding is still a good use of the money. Check the current yield and the payout ratio too.
Related terms
Built & maintained by Worthmap · Last updated November 1, 2026
Educational use only. This tool provides estimates for informational purposes and does not constitute financial, investment, tax, or legal advice. Results are based on inputs you provide and mathematical models, they do not guarantee future performance. Always consult a qualified financial adviser before making investment decisions.