On platforms like Dividend Data, you can track Yield On Cost + DRIP for your portfolio and individual investments. This helps you make informed investment decisions.
Definition:
Yield on Cost + DRIP measures the dividend yield based on the original investment amount, disregarding the cost basis of additional shares purchased through reinvested dividends. It offers a unique perspective on the performance of the original investment by isolating the impact of DRIP.
Significance in Dividend Investing
Original Investment Focus: Provides a clear view of the dividend yield return on the initial capital investment.
DRIP Impact Assessment: Helps in evaluating the effectiveness of dividend reinvestment separately from the original investment.
Long-Term Investment Growth: Useful for investors to understand the growth of their original investment over time, separate from the growth due to reinvestment.
Calculating Yield on Cost + DRIP
The formula remains the same as standard Yield on Cost, but the cost basis used excludes the reinvested dividends. Only the initial investment amount is considered.
Yield on Cost + DRIP (%) = ( Annual Dividend per Share / Original Cost Basis per Share) × 100
Factors Influencing Yield on Cost + DRIP
Dividend Growth: The rate at which a company increases its dividends has a significant impact on this metric.
Initial Investment Amount: The size of the original investment will directly affect the Yield on Cost + DRIP.
Exclusion of DRIP Shares: By focusing only on the original investment, the yield reflects the dividend growth independently of the reinvestment strategy.
Yield on Cost + DRIP vs. Traditional Yield on Cost
Unlike traditional Yield on Cost, this metric offers a distinct view by not accounting for the additional shares and cost basis from DRIP, thus providing insight into the dividend growth relative to the original investment alone.