Yield on Cost (20 years/holding period)
You want to know how your yield on cost and income will grow if you bought 10 shares of a $100 stock for a total investment cost of USD 1,000?! Example: Your stock started with a 3% yield (ca.) and has an annual dividend growth rate of 12%...
| Year | Income | Yield on Cost | Holdings Value |
| 1 | $30.00 | 3.00 | $1,030.00 |
| 2 | $33.99 | 3.40 | $1,063.99 |
| 3 | $38.62 | 3.86 | $1,102.61 |
| 4 | $44.03 | 4.40 | $1,146.64 |
| 5 | $50.36 | 5.04 | $1,197.00 |
| 6 | $57.83 | 5.78 | $1,254.84 |
| 7 | $66.69 | 6.67 | $1,321.53 |
| 8 | $77.26 | 7.73 | $1,398.79 |
| 9 | $89.95 | 9.00 | $1,488.74 |
| 10 | $105.31 | 10.53 | $1,594.05 |
| 11 | $124.04 | 12.40 | $1,718.09 |
| 12 | $147.06 | 14.71 | $1,865.14 |
| 13 | $175.61 | 17.56 | $2,040.75 |
| 14 | $211.36 | 21.14 | $2,252.11 |
| 15 | $256.57 | 25.66 | $2,508.68 |
| 16 | $314.38 | 31.44 | $2,823.06 |
| 17 | $389.16 | 38.92 | $3,212.22 |
| 18 | $487.08 | 48.71 | $3,699.30 |
| 19 | $617.03 | 61.70 | $4,316.34 |
| 20 | $791.95 | 79.19 | $5,108.29 |
example/online-calculator: http://www.dividend-calculator.com
Furthermore, you plan to hold this investment for 20 years! Another point: You plan to reinvest all your dividend payments again. Result/After 20 years you will receive following outcome - if you plan with an inflation of ca. 2% per year:
The initial USD 1,000 investment in your dividend stock should (in theory!) grow to slightly over USD 5,100 in that timeframe - AFTER deduction of 2% inflation per year.
This means, that after 20 years you would gain buying power by a factor of 4 with your initial investment. Depending on (1) your investment horizon, (2) the steadiness of the stock-performance itself and (3) the companys' consistency in sticking to its payout-ratio/dividend plan >> that would be the outcome - BEFORE any stock gains.
But one has to remember that - history tells the story - companys only then raised their dividend year on year, IF they were also able to grow their earnings year over year. As we all know, the dividend payments each year depend on the earnings.
Please remember (!): the gains on your initial investment (USD 1,000) - are just being calculated ignoring the fact, that stocks may rise over the 20years-timeframe. Therefore, in reality, the stock itself should rise as well as the dividend payments each year. So the calculated final holdings value (USD 5,108) could turn out being an exremely conservative forecast.