Calculate how dividend growth increases your effective yield over time
Yield on Cost (YOC) is a measure that shows how much dividend income you're earning relative to your original investment. Unlike the current dividend yield, which is calculated based on the current market price, yield on cost is calculated based on your purchase price.
Yield on Cost = (Current Annual Dividend per Share ÷ Original Purchase Price per Share) × 100%
Yield on cost is particularly important for dividend growth investors because it demonstrates how dividend increases can dramatically improve your effective yield over time, even if the market price of the investment also increases.
SCHD has increased its dividend at an average rate of 11.44% over the past 5 years. This growth means that your yield on cost rises significantly the longer you hold the investment.
A rising yield on cost validates a buy-and-hold strategy, showing how patience can be rewarded with increasingly higher effective yields over time.
Understanding your projected yield on cost helps with retirement planning by showing how much income your investments might generate in the future.
Yield on cost allows you to compare the long-term income potential of different dividend investments, beyond just their current yields.
SCHD has demonstrated consistent dividend growth since its inception in 2011. Understanding this growth history is essential for projecting future yield on cost.
| Year | Annual Dividend | Growth Rate | Average Yield |
|---|---|---|---|
| 2025 | $1.02 | 3.0% | 3.91% |
| 2024 | $0.99 | 12.23% | 3.67% |
| 2023 | $0.89 | 3.77% | 3.65% |
| 2022 | $0.85 | 13.90% | 3.68% |
| 2021 | $0.75 | 10.88% | 3.13% |
| 2020 | $0.68 | 6.25% | 3.25% |
Scenario: You invested $10,000 in SCHD in 2015 when the share price was $40 and the dividend yield was 2.5%.
Initial investment: $10,000
Initial share price: $40.00
Number of shares purchased: 250 shares
Initial annual dividend per share: $1.00
Initial annual dividend income: $250
Initial dividend yield: 2.5%
After 10 years (2025):
With SCHD's average dividend growth rate of approximately 11% per year:
Final annual dividend per share: $2.83
Final annual dividend income: $707.50
Yield on cost: 7.08%
Scenario: Let's extend the above example to a 20-year holding period.
After 20 years:
Assuming the same 11% average annual dividend growth rate:
Final annual dividend per share: $8.13
Final annual dividend income: $2,032.50
Yield on cost: 20.33%
This means that after 20 years, you would be earning over 20% in annual dividends based on your original investment amount — more than 8 times your initial yield!
Dividend yield is calculated based on the current market price of a stock or ETF, while yield on cost is calculated based on your original purchase price. Yield on cost shows how your effective yield grows over time as dividends increase.
SCHD has demonstrated consistent dividend growth (averaging 11.44% over the past 5 years), which leads to significant increases in yield on cost over time. Its focus on quality dividend growers makes it an excellent choice for investors seeking growing income.
Yes, theoretically, your yield on cost can exceed 100% if you hold an investment long enough with substantial dividend growth. This would mean your annual dividend income exceeds your original investment amount.
Yield on cost is most useful for existing investments to track how your income stream grows. For new investments, focus on current yield, dividend growth potential, and total return prospects rather than projected yield on cost.
Dividend reinvestment creates a blended yield on cost since you're buying additional shares at different prices. Our calculator provides the yield on cost for your initial investment only, not accounting for reinvested dividends.
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