5-Year Yield-on-Cost %
View All Terms{Dividend Yield} and dividend growth of a stock is an important factor for income investors. But if company A raises its dividend constantly faster than company B, company Aâ„¢s future dividend yield might be much higher than Company Bâ„¢s even if their yields are the same now and their stock prices do not change.
Yield on Cost assumes that you buy and the stock today, and hold it for 5 years. If the company raises it dividends at the same rate as it did over the past 5 years, the dividends investors receive annually in 5 years relative to the stock price today.
Therefore, Yield-on-Cost is calculated as
Yield-on-Cost = {Dividend Yield} * (1+{Dividend Growth Rate})^5
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