Dividend Yield on Cost Explained - 50% Dividend Yield on Cost by Warren Buffett?

TL;DR

Dividend yield on cost is calculated by dividing the trailing 12-month dividends per share by the current stock price, allowing investors to assess the return on their initial investment.

Transcript

hi i'm jimmy in this video we're looking at dividend yield on cost what it means and if it's a good thing or not for us to consider and if it is good how can we use it and then hopefully we can take this information and make slightly better investment decisions and ideally get us closer to our goal of achieving financial freedom okay so let's jump ... Read More

Key Insights

• 💨 Dividend yield on cost provides a way to assess the return on investment based on the initial purchase price.
• 🗂️ It is calculated by dividing the trailing 12-month dividends per share by the current stock price.
• ⚾ Yield on cost helps investors evaluate the income potential of an investment and make decisions based on their financial goals.
• 🇨🇷 The yield on cost formula uses the past 12 months' dividends divided by the position cost, not the current stock price.
• ✋ Selling an investment with a high yield on cost may result in taxes and the need to find a better alternative for the capital.
• 📈 Yield on cost can be a useful metric for maintaining consistent dividend income in a dividend portfolio.
• 🧑‍🏭 Dividend yield on cost should be considered alongside other factors, such as the overall quality of an investment, when making investment decisions.

Questions & Answers

Q: How is dividend yield on cost calculated?

Dividend yield on cost is calculated by dividing the trailing 12-month dividends per share by the current stock price. This provides a percentage that represents the return on investment based on the initial purchase price.

Q: Is dividend yield on cost applicable to both stocks and ETFs?

Yes, dividend yield on cost can be used to assess the return on investment for both stocks and ETFs. The calculation process is the same for both asset types.

Q: Does stock price fluctuations affect dividend yield on cost?

Stock price changes do not impact dividend yield on cost once the initial investment has been made. The yield on cost is based on the purchase price and remains constant unless additional shares are bought or sold.

Q: How can investors benefit from dividend yield on cost?

Dividend yield on cost helps investors evaluate the income potential of their investments. It allows them to compare the current dividend yield to their initial investment, helping them make informed decisions about holding or selling a stock or ETF.

Summary & Key Takeaways

• Dividend yield on cost is a metric used to evaluate the return on investment for a stock or ETF relative to its initial purchase price.

• It is calculated by dividing the trailing 12-month dividends per share by the current stock price.

• Yield on cost helps investors assess the potential income generated by an investment and make informed decisions about holding or selling the asset.