Yield on Cost
Yield on Cost is the dividend yield calculated against your original purchase price rather than the current market price. If you paid $20 per share for a stock that now pays $2 in annual dividends, your Yield on Cost is 10% — even if the current market yield is only 5%. It rewards long-term dividend investors by showing the true return on original capital deployed, not what a new buyer would receive today.
How Prospyr uses it
The Dividend Calculator displays Yield on Cost alongside current yield whenever a purchase price is entered. The distinction matters: current yield tells you what new buyers receive; Yield on Cost tells you what you receive on your original capital. As companies raise their dividends over time, Yield on Cost compounds quietly — a 5% yielder purchased five years ago at half the current share price now returns 10% on cost. Prospyr uses this metric to reinforce the income-first case: staying in a position through price appreciation is often more valuable than selling and chasing a higher current yield elsewhere.
Why this matters for Canadian investors
For Canadian investors holding eligible dividend payers inside a TFSA, Yield on Cost is particularly powerful. Growth inside a TFSA is completely sheltered — a 10% Yield on Cost on a Canadian eligible dividend generates no tax at all. The same metric on a US dividend holding inside a TFSA attracts 15% withholding tax that cannot be recovered, which materially reduces the effective return. Knowing your Yield on Cost by holding and account type tells you whether your capital is deployed in its optimal position.