Gurufocus also calculates the 5 -
year yield on cost of BMY and JNJ at 3.77 % and 4.18 %, respectively.
Not exact matches
Although Spain's borrowing
costs have fallen over the past two months
on the back of the ECB's new rescue plan, the Spanish 10 -
year yield is still hovering just below 6 percent - a level that has been seen as unsustainable since the crisis escalated in 2011.
How to Generate a 15 %
Yield on Cost in Ten
Years I highlighted the real story of one investor who put some money to work in a popular REIT a decade ago.
A
year ago, the
yield on cost was 7.7 %.
We look for the
cost of bank funding to rise faster than the
yield on earning assets over the next two
years, a situation that is likely to put an effective cap
on bank earnings and public market valuations.
After holding for three
years I realized that my other dividend growth investments had a higher
yield on cost and the difference was only going to get greater as time went
on.
Based
on those findings, the authors estimate that for cities of similar size averaging 3,187 births per
year, an annual investment of approximately $ 2.2 million in nurse home visiting would
yield community healthcare
cost savings of about $ 6.7 million in the first six months of life, or $ 3 saved for every $ 1 spent.
But NAGB hasn't released figures
on how much the new projects
cost, how much the LTT NAEP
costs, all of the projects» expected
costs in upcoming fiscal
years, and the informational benefits each of the projects are expected to
yield.
According to a nine -
year study by the National Research Council [12], the past decade's emphasis
on testing has
yielded little learning progress, especially considering the
cost to our taxpayers.
At that rate, an investment today at a 2.05 %
yield would have a
yield on cost of 6.53 % in 5
years!
Since longer - term interest rates are considered more representative of real estate financing
costs, we compared how REITs with different lease durations performed in periods of increasing 10 -
year U.S. Treasury Bond
yields, based
on month - end data.
It's the investor who has held a stock for twenty
years and has seen their dividend
yield -
on -
cost march its way up to 40 % of their initial purchase price who gets to enjoy compounding's magic.
The former numerical target of achieving 10 %
yield on cost in 10
years has been dropped.
If I buy MegaBank today, and you bought it 20
years ago, our
yield on cost will be vastly different, but our annual returns will be exactly the same from now
on.
The investor who is focused only
on the dividend will enthusiastically point out that his income has risen by 5 % every
year, and that he's now earning a 6.5 %
yield on cost.
A 4 % or 5 %
yield is great but I think 10 - 15
years down the road my AAPL
yield on cost will far exceed any utility stock I buy today.
In 10
years, Coca - Cola shareholders will have a
yield on cost of around 7.1 % thanks to growth.
If this dividend growth rate continues my
yield on cost would be almost 9 % in 5
years!
This means the government is financing itself at close to zero
cost for its short term borrowing and, further out
on the curve, the
cost of financing does not go up by much; as the
yield - to - worst
on the S&P / BGCantor 7 - 10
Year U.S. Treasury Bond Index is now at 1.48 %.
In developed markets, the right to a certain return of capital is actually
costing anywhere from — 1.5 % to — 0.5 % per
year in real purchasing power.1
On the other hand, real
yields in many of the larger emerging market economies reside solidly in positive territory — returning anywhere from about a 1 % premium over inflation in Mexico and Russia to more than 6 % in the case of Brazil.
Index A published interest rate against which lenders measure the difference between the current interest rate
on an adjustable rate mortgage and that earned by other investments (such as one, three, and five
year U.S. Treasury security
yields, the monthly average interest rate
on loans closed by savings and loan institutions, and the monthly average
costs - of - funds incurred by savings and loans), which is then used to adjust the interest rate
on an adjustable mortgage up or down.
A
year ago, the
yield on cost was 7.7 %.
That is another step
on the road to meeting the portfolio's goal of achieving 10 %
yield on cost within 10
years from when I began the portfolio in 2008.
So my goal of 10 %
yield on cost within 10
years becomes this specific target: I want the DGP to be generating dividends at a rate of $ 4678 annually by June 1, 2018.
You recall that the goal of the portfolio is a 10 %
yield on cost by 10
years.
What I shoot for is approximately 4 % current
yield with a long - range goal: I want the portfolio to achieve a 10 %
yield on cost within 10
years.
My dad hasn't even held Microsoft for six
years and he's already practically doubled his annual income, going from a starting
yield of 3 % to an annual
yield of nearly 6 % today (
yield -
on -
cost).
Yes, your income should go up each each
year — McCormick is a fantastic dividend grower — but because you're starting with such a low entry
yield it will take a decade before you're generating meaningful
yield -
on -
cost.
If the dividend increases continue at this rate I can expect a
yield on cost of ~ 4.8 % in 5
years.
That would put me at a 7.8 %
yield on cost in 5
years.
Even over the short - time period of 4
years, the
yield on cost exercise does show the power of not overpaying for a good business combined with strong dividend growth to build a rising income stream.
The reason is that the
yield on cost is computed
on the original investment that I made in the portfolio 5
years ago.
In addition, my portfolio offers an average
yield of 3.1 %, more than a 30 -
year Treasury bond, plus a
yield on cost of 3.6 %.
That is, you will reach 10 %
yield on cost in 10
years or less.
On the plus side, if you are reinvesting dividends, the number of years to hit your target yield on cost will be reduce
On the plus side, if you are reinvesting dividends, the number of
years to hit your target
yield on cost will be reduce
on cost will be reduced.
If this continues, my
yield on cost will be over 6 % in 5
years.
If the dividend continues to grow at this rate my
yield on cost will be approximately 4 % in 5
years!
More likely, your
yield on cost is going to fall if this fund cuts its payouts to shareholders — just as it has done almost every
year over the past decade.
This goal is known as 10 by 10: That means generating a
yield on cost of 10 % within 10
years of when you start the portfolio.
My
yield on cost (YoC) is 4.59 % and if Realty Income Corp continues its ~ 5.8 % dividend growth rate I should have a YoC close to 6 % in 5
years.
This brings the magic of compounding into play (see Lesson 4, The Power of Compounding), and reinvesting the dividends will lop a couple of
years off the time that it takes me to get to my goal of 10 %
yield on cost.
But the portfolio's
yield on cost has now ballooned to a current run - rate of 5.9 %, or more than 2.8 times what it delivered in its first
year of existence.
For example, a stock
yielding 5 % when you buy it will reach 10 %
yield on cost in 10
years if it increases its dividend 7 % per
year.
In this lesson, I am going to use
yield on cost to show you how you can achieve a wonderful goal: To receive, each
year, in dividends alone, an amount of cash that equals the market's long - term average annual total return.
After many
years of falling bond
yields, borrowing
costs are once again
on the rise.
But investors who bought in 10
years ago — when the company's 3.75 - cent quarterly payout represented just a 1.6 %
yield — are now enjoying a
yield on cost of more than 7 %!
Two widely used index rates are the
yield on 1 -
year constant - maturity U.S. Treasury bills (CMT) and the 11th District
Cost of Funds Index (COFI), published by the Federal Home Loan Bank of San Francisco.
We could define the split between «investment - grade» and «high -
yield» debt based
on the
cost of insuring against default for the next five
years.
(updated 2/1/2018) Lesson 2: Dividend Growth (updated 2/8/2018) Lesson 3: The 5 -
Year Rule (updated 3/12/2018) Lesson 4: The Power of Compounding (updated 3/20/2018) Lesson 5: The Power of Reinvesting Dividends (updated 4/12/208) Lesson 6:
Yield and
Yield on Cost (updated 4/26/2018) Lesson 7: Dividends are Independent from the Market Lesson 8: How to Collect 10 %
Yields from Great Dividend Growth Stocks Lesson 9: Why I've Loaded My Portfolio with Dividend Growth Stocks Lesson 10 (Part I): Reinvest Your Dividends Selectively to Enhance Your Returns Lesson 10 (Part II): Reinvest Your Dividends Automatically to Build Long - Term Positions Lesson 11: Valuation Lesson 12 (Part I): Invest According to a Plan Lesson 12 (Part II): Invest According to a Plan Lesson 13: Specific Suggestions for YOUR Dividend Growth Investing Plan Lesson 14: Buying Lesson 15: Holding and Selling Lesson 16: Diversification Lesson 17: Dividend Safety Lesson 18: High
Yield or Fast Growth?
The 5
year dividend growth rate is 19.9 % which if maintained would give me a
yield on cost over 6 % in 2020.