Understanding Dividend Yield vs. Yield on Cost
The Dividend Yield is a financial ratio that shows how much a company pays out in dividends each year relative to its current stock price. It is a vital metric for comparing the cash flow potential of different stocks.
However, for long-term investors, Yield on Cost (YOC) is often more important. This calculates the dividend yield based on the price you originally paid for the stock. As companies increase their dividends over time, your YOC can grow significantly, often far exceeding the market's current average yield.