Yield on Cost (YOC) = Current Annual Dividend ÷ Original Purchase Price × 100%. It shows your personal dividend income rate based on what you actually paid — not the current market price. Example: buy TORM at $20/share when dividend is $2/year = 10% YOC. If dividend grows to $4/year, your YOC becomes 20% on that original investment. YOC ≥8% is Marco's quality threshold for hard-asset dividend stocks. Once you hit >10% YOC on a position, it becomes extremely valuable to hold.
If you bought a stock for $20 and it now pays $2 annual dividend, the current yield is based on today's price. But your personal Yield on Cost is based on what you paid — $20 — giving you a YOC of 10%, regardless of whether the stock now trades at $40.
Example: You bought TORM at $18/share in 2022. Current annual dividend: $3.20/share. YOC = 3.20 / 18 × 100 = 17.8% YOC — even if current yield at market price is only 6%.
For shipping, mining, and pipeline stocks — which often trade at deep cycles — YOC captures the true power of buying at cyclical lows:
| Stock | Buy Price | Current Dividend | YOC | Current Yield |
|---|---|---|---|---|
| CMB.Tech | $14 | ~$2.10 | ~15% | ~12% |
| TORM | $18 | $3.20 | 17.8% | ~6% |
| BW LPG | $14 | $0.67 Q1 | >8% annl. | ~10% |
Example figures for illustration. Not investment advice. Always verify current dividends.
Enter your purchase price and current dividend in the free calculator:
Free YOC Calculator — instant 10-year projection:
Open YOC CalculatorNot every purchase needs to hit 8% YOC immediately. The point is to buy at a price where the expected YOC over 2-3 years reaches the 8% threshold as dividends grow or the company's cashflow recovers:
THESIS: The YOC framework is most powerful in combination with free cash flow analysis. A high YOC based on a dividend that's not covered by FCF is meaningless — the dividend will be cut. Always check: is the current dividend <80% of free cash flow per share?
The real power of YOC appears when a company grows its dividend every year. If you buy a stock at $30 with a $1.50 dividend (5% current yield, 5% YOC) and the company grows its dividend 8% per year:
This is why dividend growth companies that start below the 8% threshold can still be excellent long-term holdings — provided the business sustains its dividend growth trajectory.
Current Yield is what any investor buying today gets. It's the same for everyone and changes daily with the stock price. YOC is personal — it reflects your entry price, not today's market price. YOC is the metric that matters for evaluating your own portfolio's income performance over time.
Example: You bought Realty Income (O) at $40 when it yielded 5%. Today it trades at $55 and yields 4.9%. A new investor sees 4.9%. You see a YOC of 6.75% (because your cost is still $40). Your actual return on invested capital has compounded — the current yield number misses this entirely.
For portfolio decisions: use current yield to compare new positions. Use YOC to evaluate existing holdings and decide whether to hold or sell.
Marco applies a simple YOC threshold: a position is worth holding long-term if the YOC based on current cost exceeds 8%. This is not an arbitrary number — 8% represents the approximate long-term average total return of equity markets. If a dividend position pays 8%+ on cost and the underlying business is growing or stable, you are being paid as much as (or more than) the market's average expected return, purely from dividends. Any capital appreciation is pure upside.
The practical implication: when Marco reviews existing positions, YOC is the first filter. A shipping stock bought at $18 that now trades at $26 but pays $2.20/share in dividends has a YOC of 12.2% on original cost — no reason to sell just because the current yield looks lower than when bought. A stock that has cut its dividend to where YOC is now 4% on original cost: time to reassess the thesis.
Want to model your own YOC trajectory? Use the free YOC Calculator →
Even experienced investors make YOC errors that distort their portfolio performance picture:
In 2026, the hard asset investor's YOC picture is particularly interesting. Investors who entered TORM (TRMD) in the $14-18 range during 2020-2021 are now looking at YOC of 15-20%+ based on the elevated dividend distributions of 2022-2025. The same is true for CMB.Tech, FLEX LNG, and other shipping names that multiplied their dividends during the freight rate boom.
The key lesson from this cycle: hard asset companies that pay variable dividends based on cash generation can produce extraordinary YOC spikes during rate peaks. The discipline is to buy at cycle lows (where your entry YOC is immediately compelling at 8-10%+) and hold through the rate cycle, capturing both the high YOC years and the recovery into the next cycle.
For 2026 specifically: with FLEX LNG paying its 19th consecutive dividend of $0.75/share and TORM paying $0.70 on June 11, investors who entered these positions at cycle lows continue to collect exceptional YOC. The framework remains: entry YOC ≥8%, FCF coverage above 1.2x, TCE rate trajectory positive.
Related: Best High-Yield Dividend Stocks 2026: 6–12% Yields
Investor & Analyst | Hard Assets, Dividends, Shipping | MB Capital Strategies
Marco tracks YOC on all positions in his hard asset portfolio. Not financial advice.
