Financial Tools

Yield on Cost Calculator for Shipping & High-Yield Stocks

Quick Answer

Yield on Cost (YOC) measures your annual dividend income as a percentage of what you originally paid — not the current price. Formula: YOC = Annual Dividend / Purchase Price × 100. Example: bought Enbridge at $40, now pays $3.66/year → YOC = 9.15%, even if the current yield is only 7%. In shipping and hard-asset stocks, YOC swings faster because dividends are often variable — TORM (TRMD) paid $0.45/share in 2021 and $8+/share in 2024 as tanker rates spiked, meaning an early buyer's YOC exploded past 100% at 2021 entry prices. A high YOC ≥8% signals you bought well and held through dividend growth or a rate cycle. MB Capital Strategies targets YOC ≥8% as a quality threshold for new hard-asset positions.

See how dividend growth transforms your yield on the original purchase price over time — built for shipping, mining, pipeline and other high-yield hard-asset stocks.

Free yield-on-cost calculator: calculate your true dividend yield based on your original purchase price vs current dividend payments.

What Is Yield on Cost?

Yield on cost (YOC) is a financial metric that measures the annual dividend income you receive relative to the original price you paid for a stock — not its current market price. It is one of the most important tools for long-term dividend investors because it reveals how effectively dividend growth has compounded your income stream over time.

While the standard dividend yield changes every day as the stock price moves, yield on cost is anchored to your personal cost basis. This makes it a powerful way to track how much income your original investment dollars are actually generating. For buy-and-hold investors in dividend growth stocks, YOC often climbs well above the market average yield within just a few years of holding a quality compounder.

The yield on cost formula is straightforward:

Yield on Cost = (Current Annual Dividend per Share ÷ Original Purchase Price per Share) × 100

For example, if you bought a stock at $40 per share and it now pays $2.40 in annual dividends, your yield on cost is 6.0% — regardless of whether the stock currently trades at $60 or $80. The key insight: your yield is locked to your entry price, and every dividend raise permanently increases it.

How to Calculate Yield on Cost: Step-by-Step Real Example

Let us walk through a concrete example using Coca-Cola (KO), one of the most famous Dividend Kings with 62+ consecutive years of dividend increases:

  1. Record your purchase price. Suppose you bought 100 shares of KO in early 2016 at approximately $40 per share (total investment: $4,000).
  2. Find the annual dividend at purchase. In 2016, Coca-Cola paid an annual dividend of about $1.40 per share. Your starting yield was $1.40 / $40 = 3.50%.
  3. Find the current annual dividend. By 2026, KO pays an annual dividend of approximately $2.12 per share, after a decade of ~5% annual dividend growth.
  4. Apply the YOC formula. Yield on Cost = $2.12 / $40.00 = 5.30%.

That means your personal yield on cost has grown from 3.50% to 5.30% over ten years — a 51% increase in income — without investing a single additional dollar. Your 100 shares now generate roughly $212 per year in dividends compared to $140 when you first bought them.

If dividend growth continues at 5% annually for another 10 years, the projected annual dividend would reach approximately $3.45 per share, pushing your yield on cost to 8.63% on the original $40 cost basis.

Why Yield on Cost Behaves Differently for Shipping & Hard-Asset Stocks

The Coca-Cola example above is the textbook case: a stable dividend grower with predictable, low-single-digit annual increases. Shipping and hard-asset stocks work very differently because their dividends are frequently variable, tied directly to charter rates, commodity prices, or spot cashflow rather than smooth per-share growth targets.

Take TORM (TRMD): an investor who bought at $20/share in 2021 was collecting a modest dividend at the time. By 2024, with tanker charter rates elevated post-sanctions rerouting, TORM's per-share payout had risen into the multi-dollar range — pushing that investor's yield on cost well above 30-40%, an outcome no traditional dividend grower can replicate on a similar timeframe. The flip side is real: a shipping stock bought at the top of a rate cycle can see its YOC collapse just as fast if charter rates normalize and the variable dividend is cut accordingly. This is why entry timing and cycle awareness matter far more for shipping YOC than for a Dividend Aristocrat like Coca-Cola.

Contract-backed names behave more like traditional growers: FLEX LNG (FLNG), with 90%+ of its fleet on long-term time charters, pays a steadier dividend that still yields 8-12% at typical entry prices — closer to a predictable YOC compounding curve than a spot-exposed tanker. Use the calculator above with a 0% growth rate to stress-test a variable-dividend shipping position, or a modest 3-5% growth rate for contract-backed names.

Yield on Cost vs. Current Yield: What Is the Difference?

These two metrics are often confused, but they answer very different questions:

Feature Yield on Cost (YOC) Current Dividend Yield
Price Used Your original purchase price Today's market price
Changes When... The dividend changes (up or down) The stock price or dividend changes
Best For Measuring income growth on your investment Comparing new investment opportunities
Limitation Backward-looking; ignores capital gains/losses Fluctuates daily with stock price moves
KO Example (bought 2016) 5.30% ($2.12 / $40) ~2.8% ($2.12 / ~$75)

Key takeaway: Current yield is the right metric when deciding where to invest new money today. Yield on cost is the right metric when evaluating how well your existing holdings are performing as income generators. Smart dividend investors track both.

YOC Calculator FAQ

What is a good yield on cost?

There is no universal benchmark, but many dividend growth investors aim for a yield on cost above 5% within 10 years of purchase. Investors who bought blue-chip Dividend Aristocrats like Coca-Cola, Johnson & Johnson, or Realty Income a decade ago often enjoy YOC figures of 5–8% or more today, even though the current market yield on those stocks is only 2–5%. For shipping and other high-yield hard-asset stocks, the entry bar is higher: MB Capital Strategies targets a minimum 8% YOC on new positions, since these sectors carry more cyclical and dividend-cut risk than a Dividend Aristocrat.

Why is yield on cost so volatile for shipping stocks?

Many shipping companies (TORM, Frontline, Golden Ocean) pay variable dividends set as a percentage of quarterly earnings rather than a fixed per-share target. When charter rates spike, the dividend — and therefore your YOC — can multiply within a year or two. When rates fall, the dividend and YOC can drop just as fast. Contract-backed shipping names (FLEX LNG, most LNG carriers on long-term time charters) behave more predictably because their cashflow is locked in for years. Always check whether a shipping stock's payout is variable or contract-backed before assuming a snapshot YOC will persist.

Does yield on cost include reinvested dividends?

No. Traditional yield on cost only considers the dividend income relative to your original purchase price. It does not factor in shares acquired through dividend reinvestment (DRIP). If you reinvest dividends, your effective cost basis changes, and you would need to recalculate YOC using your total invested amount. Use our DRIP Calculator to model reinvestment returns separately.

Can yield on cost go down?

Yes. If a company cuts its dividend, your yield on cost will decrease. For example, many energy companies and REITs reduced dividends during 2020, which lowered YOC for investors who held those shares. This is why it is critical to invest in companies with strong balance sheets and long histories of dividend growth rather than chasing the highest yield alone.

Is yield on cost relevant for ETFs and index funds?

Yes. You can calculate yield on cost for any dividend-paying security, including ETFs like the Vanguard High Dividend Yield ETF (VYM) or the Schwab U.S. Dividend Equity ETF (SCHD). The formula is the same: current annual distribution divided by your original purchase price per share.

How does dividend growth rate affect yield on cost over time?

Dividend growth rate has an enormous impact on long-term YOC due to compounding. A stock purchased with a 3% starting yield and 7% annual dividend growth will reach a yield on cost of roughly 5.9% after 10 years and 11.6% after 20 years. By contrast, the same 3% starting yield with only 3% dividend growth reaches just 4.0% YOC after 10 years. Use the calculator above to model different growth scenarios.

What are the limitations of yield on cost?

Yield on cost is backward-looking and does not account for total return (capital gains plus dividends). It can also create a false sense of security: a high YOC does not mean the stock is still a good investment today. A company whose stock price has collapsed may show a high YOC but could be at risk of a dividend cut. Always combine YOC analysis with current yield, payout ratio, and fundamental research.

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YOC in action: BW LPG Q1 2026: $0.67 Dividend — Calculate YOC →