What is yield on cost?

Yield on cost is a financial metric that measures the annual dividend or interest income earned on an investment relative to its original cost. It is calculated by dividing the annual dividend or interest income generated by an investment by the initial cost of the investment and expressing the result as a percentage.

Yield on cost is often used by investors to evaluate the return they are earning on their original investment and to compare the income generated by different investments. It is particularly useful for investors who have held an investment for a long period of time and want to assess the income generated relative to the initial cost of the investment.

It is important to note that yield on cost does not factor in the current market value of the investment or any capital gains or losses that may have been realized. It only considers the income generated relative to the original cost of the investment.

Yield on cost can be a useful tool for evaluating the long-term performance of an investment and determining whether it is meeting income expectations. However, it should be used in conjunction with other financial metrics to get a comprehensive picture of an investment's performance.