# How to Calculate Dividend Yield and Yield on Cost

Calculating dividend yield is quite simple once you understand the formula behind it. In this article, we take a detailed look at how to calculate both the dividend yield and your yield on cost.

## Dividend Yield

Dividend Yield allows you to measure the income produced by your investment. It a ratio of the amount of money paid out in dividends each year in relation to its current share price. You can use the formula below to calculate dividend yield.

f(annual dividend payment, current stock price) = (x/y)100 {(R,R) -> (R)}

Let’s say you are trying to find the dividend yield on a stock that has an annual dividend payment of \$4.20 and a current share price of \$100. You would then input this data into the formula:

f(4.20, 100) = (4.20/100)*100 resulting in 4.2%.

## Yield On Cost

Many investors also like to calculate Yield on Cost. Yield on Cost is an investment ratio that refers to the annual dividend divided by the original cost basis of the asset.
You can calculate your yield on cost by using this formula:

f(annual dividend payment, average buy price) = (x/y)*100 {(R,R) -> (R)}

For example, if you are trying to find the YOC of a stock that had an annual dividend payment of \$4.20 and an original purchase price of \$25, you would use the following calculation:

f(4.20, 25) = (4.20/25)*100 resulting in 16.8%.

## What This Means to You

After you calculate your dividend yield, you can alsostimate the amount of money you can expect to earn through your dividend stock. You can do this by applying this formula:

f(dividend yield, current position value) = (x*y) {(R,R) -> (R)}

Let’s say that you are trying to find the annual yield on cost earnings on a particular stock. You know that the annual cost on yield is 16.8% and the position value is \$10,000. You input this data into the formula:

f(0.168, 10000) = (0.168*10000) resulting in \$1680 in income a year from this position

We hope understanding these calculations benefits you. But keep in mind, if you don’t want to do the math you can use our simple system to track your dividend stocks.

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