Yield on Cost for Canadian Investors

Current yield answers the question, “What would this stock pay if I bought it today?” Yield on Cost answers a different question: “What is my original capital earning now?” Those numbers diverge when a company raises its dividend or when the market reprices the stock far above your purchase price.

That makes Yield on Cost especially useful for long-held dividend positions. It reveals how powerful your existing income engine has become without requiring more capital. It is not the only yield worth tracking, but it is often the one that best reflects what your portfolio is doing for you.

• Yield on Cost is your annual dividend divided by your original purchase price, not today's market price.
• It rises every time a company increases its dividend while your cost base stays fixed.
• A stock yielding 5% today may be yielding far more on your own cost if you bought years ago at a much lower price.
• It is especially powerful in a TFSA because the growing income stream remains sheltered as it compounds.
• Current yield still matters for new buys. Yield on Cost matters most for understanding what an existing holding is doing for your income plan.

Yield on Cost is not a reason to ignore valuation or hold a weak position forever. It is a way to understand the productivity of capital you already deployed. A high Yield on Cost can justify patience in a strong holding, but new capital should still be judged on today's yield, dividend quality, and after-tax fit.

That is why Yield on Cost works best beside tools that also show current yield, tax treatment, and account-specific results. The point is context, not nostalgia.