How did my YOC developed?
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 YOC from consecutive months to see if my original investment is paying me a higher dividend.
Yield On Cost
Your Yield On Cost measures the rate of dividend income that your original investment earns today. YOC 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.
I track my YOC for my Vrijheid Fonds. In Table 1 you can see my YOC per share for October 2019.
|company||Shares||Share Price||Cost Base||Dividend||Yield||YOC|
|NN Group NV||€||20||33.34||723||2.00||6.00%||5.53%|
|Royal Dutch Shell||€||396||26.13||5,922||1.72||6.58%||11.50%|
|Billiton – PLC||$||30||42.02||1,578||3.12||7.43%||5.93%|
|Omega Healthcare Investment||$||144||43.39||4,959||2.65||6.11%||7.70%|
|Procter & Gamble||$||38||117.23||2,922||2.98||2.54%||3.87%|
|South 32 LTD||$||12||8.37||–||0.44||5.28%||100.00%|
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 three years and the stock price is a bit lower than the moment, I bought these shares. The other companies are due to lower share price than the original purchase price or because they are recent additions to my Vrijheid Fonds.
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 an increasing dividend every year gives you an increasing YOC.
My overall YOC is positive for my Vrijheid Fonds. The weighted average YOC is 5.00%.
If we compare 2019 with 2018, 2017 and 2016, you can see that most of my companies have a better YOC than last year. This is really nice and that is what I want. This increase is due to the dividend increases from the past 12 months. In Table 2 you can see the YOC from the two years.
|NN Group NV||€||5,53%|
|Royal Dutch Shell||€||9.64%||10.31%||10.86%||11,50%|
|Billiton – PLC||$||1.22%||2.05%||4.18%||5,93%|
|Omega Healthcare Investment||$||6.74%||7.32%||7.67%||7,70%|
|Procter & Gamble||$||6.74%||6.95%||3.73%||3,87%|
|South 32 LTD||$|
Table 2. Yield on Cost comparison 2016-2019.
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?