Polliesdividend

Does my investment pay a higher dividend? – 2018

What is my Yield on Cost – 2018?

In 2016 I did my first post about Yield on Cost (YOC). See my post YOC-2016.

In this post I calculated the YOC for every stock I own. As we all know YOC is a common metric for Dividend Growth Investors to measure and manage their portfolio. And I’m one of them 🙂 . I thought it would be nice to compare my 2016-YOC and 2017-YOC with my 2018-YOC to see if there is progress.

 

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Yield On Cost

This measures the rate of dividend income that your original investment earns today. Yield on cost is essentially the dividend yield based on your initial investment in a stock. If a company increases its dividend after you purchased shares, you will enjoy a higher rate of income return on your original investment – your yield on cost rises. And of course when a company cuts its dividend, your YOC will decrease.

Yield on cost shows you whether a stock’s dividend has been rising or falling since your investment was purchased.

I like tracking my yield on cost of my holdings to see the power of consistent dividend growth. I think it is exciting to see my investment literally begin to pay for itself with higher dividend income over time.

 

How to calculate your Yield On Cost

This is a very simple metric to calculate. All you need is a company’s annual dividend and your cost base per share. So to calculate your YOC, you need to divide a company’s annual dividend by the your cost base per share.

It will be a little more difficult when you have made more than one purchase of a company (for instance, when you use Dollar Cost Average). If you want your cost base per share purchase you have to turn to your broker. In this article I use my overall cost base per share.

 

Vrijheid Fonds

I track my YOC for my Vrijheid Fonds. In Table 1 you can see my YOC per share for 2018.

 

company Shares Share Price Cost Base Dividend Yield YOC
Ahold 427  21.14  3,506 0.63 2.98% 7.67%
Bayer 12 93.40  1,186 2.80 3.00% 2.83%
Royal Dutch Shell 374  29.97  5,922 1.72 5.74% 10.86%
Unilever 247  48.02  6,540 1.56 3.25% 5.89%
3M $ 9 201.14  1,753 5.44 2.70% 2.79%
Aflac $ 48  42.60  1,435 1.04 2.44% 3.48%
Archer-Daniels-Midland $ 41  47.56  1,499 1.34 2.82% 3.67%
AT&T $ 100  31.66  3,744 2.00 6.32% 5.34%
Billiton – PLC $ 30  43.88  1,578 2.20 5.01% 4.18%
Chevron $ 36  124.00  3,720 4.48 3.61% 4.34%
Coca Cola $ 80  44.74  3,001 1.56 3.49% 4.16%
Consolidated Edison $ 24 79.49  1,862 2.86 3.60% 3.69%
Franklin Resources $ 50  32.33  1,811 0.92 2.85% 2.54%
General Elecrtic $ 60  13.89  1,587 0.48 3.46% 1.81%
Johnson& Johnson $ 45  125.87  4,628 3.60 1.80% 3.50%
McDonalds $ 21  158.48  2,093 4.04 2.55% 4.05%
Microsoft $ 32  105.41  1,507 1.68 1.59% 3.57%
Omega Healthcare Investment $ 144  31.33  4,959 2.64 8.43% 7.67%
Procter & Gamble $ 38  79.32  2,922 2.87 3.62% 3.73%
Realty Income $ 120  55.12  6,027 2.64 4.79% 5.26%
South 32 LTD $ 12  13.48  –   1.46 10.83% 100%
Southern Company $ 50 47.95  2,385 2.38 4.96% 4.99%
Target $ 70  77.72  4,069 2.52 3.24% 4.33%
Vereit $ 100  7.70  1,310 0.55 7.17% 4.21%
Wal-Mart Stores $ 45  87.71  2,931 2.08 2.37% 3.19%

Table 1. Yield on Cost for my Vrijheid Fonds.

You can see that most of my stocks have a positive YOC compared to the actual Yield. This means that for these shares my dividend growth strategy really works!

Unfortunately my Vrijheid Fonds has a couple of companies were the YOC is lower than the actual yield. For BBL this is because they slashed the dividend two years and the stock price is way lower than the moment I bought these shares. The other companies are due to lower share price than the original purchase price.

The biggest difference between Yield and YOC are from the two companies I own the longest (since 2005 – Ahold Delhaize and Royal Dutch Shell). And this also shows that increasing dividend every year gives you an increasing YOC.

 

Comparison

If we compare 2018 with 2017 and 2016, you can see that my weighted average YOC is slightly higher than last year.

Most of my companies have a better YOC than last year. This is really nice and what I want. This increase is due to the dividend increases from the past 12 months. My overall YOC is positive for my Vrijheid Fonds. The weighted average YOC is 4.72%.

In Table 2 you can see the YOC from the two years.

 

Company 2016 2017 2018
Ahold 6.57% 6.76% 7.67%
Bayer AG   0 2.83%
Royal Dutch Shell 9.64% 10.31% 10.86%
Unilever 4.68% 4.59% 5.89%
3M $   0 2.79%
Aflac $ 2.74% 2.88% 3.48%
Archer-Daniels-Midland $ 3.28% 3.50% 3.67%
AT&T $ 5.36% 5.47% 5.34%
Billiton – PLC $ 1.22% 2.05% 4.18%
Chevron $ 4.14% 4.18% 4.34%
Coca Cola $ 3.73% 3.95% 4.16%
Consolidated Edison $   0 3.69%
Franklin Resources $ 0 2.21% 2.54%
General Electric $ 3.48% 3.63% 1.81%
Johnson& Johnson $ 3.34% 3.27% 3.21%
McDonalds $ 3.57% 3.77% 4.05%
Microsoft $ 3.06% 3.31% 3.57%
Omega Healthcare Investment $ 6.74% 7.32% 7.67%
Procter & Gamble $ 6.74% 6.95% 3.73%
Realty Income $ 5.48% 5.81% 5.26%
South 32 LTD $      
Southern Company $   0 4.99%
Target $ 3.98% 4.27% 4.33%
Vereit $ 4.20% 4.20% 4.21%
Wal-Mart Stores $ 3.07% 3.13% 3.19%

Table 2. Yield on Cost comparison 2016-2018.

 

Finally

YOC does not play a role in my investment decision. As frequent readers of my blog know, for my investment decisions I use the metrics from my Pollie-Code. But yes, I like YOC and my positive weighted average YOC tells me that my dividend growth strategy works.

Do you calculate and track your YOC?  And do you use this metric in your investment decisions?

Cheers,

Pollie

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4 thoughts on “Does my investment pay a higher dividend? – 2018

  1. DivvyDad

    Great review on the YOC and how your portfolio has performed over the years. I do track YOC as well and have it built into my spreadsheet that I use for my portfolio. As of today, my overall portfolio dividend yield averages 2.81% and my YOC is 4.02%.

    One of my 2018 goals is to maintain a YOC over 3.5% so doing well on that one so far. I also have a long-term goal to achieve YOC of 6% or more.

  2. Dividend Portfolio

    Great post. I do not calculate my YOC, but after reading this, I might start. My problem though is that I dollar cost average, which makes calculating this difficult. I will have to check if the calculation is already done via my brokerage, but regardless, I think it’s a good number to know.

    Although I generally don’t like investing in companies with a low yield (e.g. 1-2%), I also have to remind myself that I’m invested for the long-term and that my yield on cost will likely be higher by the time I get to retirement.

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