Strategies14 min read
AI Prompts for Testing Dividend Strategies
Use AI to generate, backtest, and compare dividend strategies with repeatable prompts. Includes a quarterly review workflow and strategy templates.
Feb 22, 2026 Read More
Learn what yield on cost means and how to calculate it. See how your effective dividend yield grows as companies raise their payouts over time.
The Yield on Cost Calculator shows how your effective dividend yield grows as companies increase their payouts. This powerful metric reveals the true reward of patient, long-term dividend investing.
Try the Yield on Cost Calculator
Yield on Cost (YoC) measures your dividend yield based on your original purchase price, not the current stock price.
The formula:
Yield on Cost = (Current Annual Dividend / Original Purchase Price) × 100
Example:
Even though new buyers only get 3%, you're earning nearly 6% on your original investment!
Current yield only tells today's story. YoC shows what patient investors actually earn.
Watching your YoC climb year after year reinforces the value of holding quality dividend growers.
A stock yielding 2% today might seem unexciting. But with 10% dividend growth, it becomes a 5% yield in 10 years and 13% in 20 years - all on your original cost.
How much you invested (or plan to invest). This is your cost basis that doesn't change.
The yield when you first bought (or would buy today). This is your baseline.
Benchmarks:
How much you expect the dividend to increase each year. This is the key driver of YoC growth.
Historical growth rates:
How long you plan to hold. YoC really shines over long periods - 10, 15, 20+ years.
Use the preset buttons to see typical scenarios:
Four key metrics at a glance:
Shows your YoC progression year by year. Notice how growth accelerates - that's compound dividend growth in action.
Detailed breakdown showing:
Results:
Results:
Results:
This calculator helps you compare strategies:
| Strategy | Year 1 Income | Year 20 Income | Total Received |
|---|---|---|---|
| 5% yield, 2% growth | $500 | $743 | $12,169 |
| 3% yield, 7% growth | $300 | $1,161 | $12,299 |
| 2% yield, 10% growth | $200 | $1,346 | $11,455 |
Key insight: Higher growth eventually beats higher starting yield, and provides inflation protection. But if you need income immediately, higher yield may be better.
Consider a stock with:
| Year | YoC | Annual Income |
|---|---|---|
| 1 | 3.0% | $300 |
| 5 | 4.0% | $401 |
| 10 | 5.4% | $537 |
| 15 | 7.2% | $718 |
| 20 | 9.6% | $961 |
| 25 | 12.9% | $1,286 |
| 30 | 17.2% | $1,720 |
After 30 years, you're earning 17.2% annually on your original investment - more than triple what a savings account pays!
Focus on companies with long track records of raising dividends:
Time is the key ingredient. Starting 5 years earlier can dramatically increase your ending YoC.
It's tempting to take profits, but selling a dividend grower means losing that growing income stream.
DRIP buying more shares at various prices, each generating growing dividends.
Buying more shares when prices drop (but fundamentals remain strong) increases your overall YoC.
Yes! Your shares purchased via DRIP each have their own YoC. Overall, your portfolio YoC will be a weighted average of all your purchases.
Your YoC would decrease. This is why quality matters - focus on companies with consistent, sustainable dividend growth.
Indirectly. A high YoC stock delivers more income relative to your cost basis, which affects your tax situation.
Use AI to generate, backtest, and compare dividend strategies with repeatable prompts. Includes a quarterly review workflow and strategy templates.
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