Differences
This shows you the differences between two versions of the page.
Next revision | Previous revision | ||
yield_on_cost [2012/10/04 20:27] tom created |
yield_on_cost [2015/12/08 17:18] (current) tom |
||
---|---|---|---|
Line 1: | Line 1: | ||
+ | |||
+ | ==== Yield on Cost ==== | ||
+ | |||
+ | "If you are planning to retire in 10 to 15 years, we think you should consider buying stocks that have long histories of dividend increases. While investors tend to look at the current yield (the indicated dividend dividend by the share price) of a stock, we believe __yield on cost__ (the indicated dividend divided by the per share purchase price) may be a more accurate measure of the long term value of a dividend." | ||
+ | |||
+ | "For me the value of YoC is understanding the history of how a company treats its shareholders. In other words, simply helping to answer the question, "Is it a good company to invest in over the long term?" | ||
+ | |||
+ | " | ||
+ | |||
+ | 81% yield on cost - “From 1956 to 1981, the IBM dividend grew 19 percent a year. That 19 percent is a handsome return all by itself, even if capital appreciation had been zero. The total accumulation of dividend over those 25 years equaled six times the original purchase price in 1956. The 1981 dividend was equal to 81 percent of the original purchase price.” Peter L. Bernstein, FAJ March/April 1985 | ||
+ | * My friend Kerry is a Chartered Accountant, so he thinks like an accountant. Kindly, he sent me these thoughts on 'Yield on Cost.' "YOC is an indicator of what a stock has done in the past. The decision to sell, buy or hold should be based on what a stock is going to to do in the future." | ||
+ | |||
+ | * If yield my on cost is rising, I know I own a fine company: both yield and price are being driven by increasing dividends. We relish the increasing dividend deposits in our accounts. Our highest YOC is BNS bought in 1990 at a split adjusted $3.64 a share: its 68%. BNS dividend was 25¢ in 1990: now (October 2013) it's $2.48. | ||
+ | * OUR YOC's - A list of the 22 common stocks we own (never preferred) with their YOC, start dividend rate and price were outlined in Connolly Report of August 2011. Eight have double digit YOCs. Driven by dividend growth, our prices are now well over one million dollars. I never would have dreamed. | ||
+ | * We purchased, luckily, some Great West Life in March 2009 for $14.18 per share. The dividend was, and still is, $1.23. the yield is therefore 8.7%. The current price (Nov 2013) happens to be $33 a share. With the higher price, the yield is now 3.7%. Neither of these things change our yield, do they? Our yield is still 8.7%. Suppose though, that the dividend had increased over the last few years. The income on our investment would be up and so would our yield be up. | ||
+ | * "With each dividend increase, the return on invested capital grows higher." | ||
+ | |||
+ | * Some people who do not ' | ||
+ | * Most of the long-run return from stocks comes from dividends...increasing dividends. Yield on cost is a method of measuring this return. Don't believe most of the return on stocks comes from dividends? In his 1934 classic //Security Analysis//, Ben Graham put it this way: "Since the market value in most cases has depended upon the dividend rate, the latter could be held responsible for nearly all the gains ultimately received by investors." | ||
+ | |||
+ | * AGAINST YOC - "I cannot agree with you when you give " | ||
+ | |||
+ | * DIVIDEND on ACQUISITION - “I just recommended a stock to my Yield Shark subscribers that’s the epitome of “doing something smart.” It’s paying a 2% dividend right now—not all that exciting, you might say. BUT its dividends have risen so consistently that had you bought shares 15 years ago, your “dividend on acquisition” (i.e., today’s dividends as a percentage of what you actually paid for the stock) would now be an astonishing 14.6% per year. Combine equity appreciation and dividends, and you end up with a total return of 502% over 15 years. Not too shabby, if you ask me.” | ||
+ | |||
+ | |||
+ | |||
+ | |||
+ | |||
+ | |||
+ | |||
+ | |||