How does Yield and Yield on Cost work?

“Yield” and “Yield on Cost” are two important terms for dividend investors. They indicate the dividend yield as a percentage of a security or portfolio. These figures help investors estimate how much income they can expect from dividends based on their investment.

How do we calculate the Yield of a security?

Within the security page, we take into account the annual dividend amount when calculating the Yield. This means that we look at the total dividend amount that you would receive per share. For example, if Coca-Cola pays out € 0.50 per quarter, we use the annual dividend of € 2.00.

Yield

The Yield shows the dividend income as a percentage compared to the current market price.

Yield = Annual dividend / Price

If Coca-Cola pays out € 2.00 in dividends annually and the current price is € 60.00, you end up with a Yield of 3.33% (€ 2 / € 60).

Yield on Cost (YoC)

Yield on Cost shows the dividend income as a percentage of the price you originally paid for the security. This helps you see how your return develops as the dividend grows.

Yield = Annual Dividend / Average purchase price

If Coca-Cola pays out € 2.00 in dividends annually and your average purchase price is € 50.00, you end up with a Yield on Cost of 4% (€ 2 / € 50).

How do we calculate the Yield on the dividend page?

On the dividend page you can select your own period.

If you select half a year as a period, your Yield will be lower than the annual Yield because only half a year's worth of dividends is included. For example, if you look at a period of three years, your yield will be higher than the annual yield because you have received a lot more dividend in three years. We then combine all dividends within this period and call that the Cumulative dividend yield.

Do you want to know your annual Yield on the dividend page? Then select a period of one year or 12 months.

Yield on your portfolio

For your portfolio Yield, the total dividend income within the selected period is considered in relation to your portfolio value and broker deposits at the end of the selected period.

Yield = Dividend income (within period) / Portfolio value (end of period)
Yield on Cost = Dividend income (within period) / Broker deposits (end of period)

If you receive € 500 in dividends in the last 6 months and your total portfolio value is € 10,000 at the end of the period, you would end up with a portfolio Yield of 5% (€ 500 / € 10,000).

If you receive € 500 in dividends in those same 6 months and at the end of the period your total broker deposit is € 8,000, you would end up with a portfolio Yield on Cost of 6.25% (€ 500 / € 8,000).

Yield per position

Just like on the effect page, we also show the Yield of a position on the dividend page, with the difference that on the dividend page the Yield is determined based on the selected period. This makes the calculation somewhat more complex:

Yield = Average dividend per share (within period) / Price (end of period)
Yield on Cost = Average dividend per share (within period) / Average purchase price (end of period)

Example 1: Fixed number of shares

If Coca-Cola pays out € 0.50 per share twice in the last 6 months, you will have received an average of € 1.00 in dividend per share (€ 0.50 + € 0.50).

With a current price of € 60, you will end up with a Yield of 1.6% (€ 1.00 / € 60).

Because there are no changes in the number of shares, the average dividend per share remains equal to the total dividend received per share.

Example 2: Shares are purchased, dividend remains the same

Suppose that at the start of the period you own 2 Coca-Cola shares and receive € 0.50 dividend per share. You then buy 2 additional shares, meaning that you own a total of 4 shares. The dividend per share remains the same at € 0.50 per share at the next payment. Then you will receive an average of € 0.75 in dividend per share ((2 x € 0.50) + (4 x € 0.50)) / 4.

With a current price of € 60, you will end up with a Yield of 1.25% (€ 0.75 / € 60).

Example 3: Shares are purchased and dividend increases

Suppose that at the start of the period you own 2 Coca-Cola shares and receive € 0.50 dividend per share. You then buy 2 additional shares, meaning that you own a total of 4 shares. The dividend per share is increased by € 1.00 per shareat the next payment. Then you will receive an average of € 1.25 in dividend per share ((2x € 0.50) + (4 x €1.00)) / 4.

With a current price of € 60, you will end up with a Yield of 2.08% (€ 1.25 / € 60).