Learn / Yield on cost
Three figures on the FolioBright dashboard look alike and are not: yield on cost, current yield and forward yield. Each divides an income figure by a different base, and the base is the whole point. This page shows the arithmetic on one holding, so that when the three disagree you know which one is answering your question.
One holding, three yields
Say you bought 1,000 shares at $40.00, a cost of $40,000. The shares trade at $58.00 today, so the position is worth $58,000. This year the company has paid $2.40 a share, $2,400 in all, and it has just declared a rate that works out to $2.52 a share for the coming year.
The same income, three ways
| Figure | Arithmetic | Result |
|---|---|---|
| Yield on cost | income this year ÷ cost of what is held $2,400 ÷ $40,000 | 6.00% |
| Current yield | income this year ÷ value today $2,400 ÷ $58,000 | 4.14% |
| Forward yield | next twelve months, projected ÷ value today $2,520 ÷ $58,000 | 4.34% |
All three are true. Yield on cost says the money you put in is earning 6.00% a year — the figure a dividend investor who bought years ago cares about, and the one that keeps rising as a company raises its payout. Current yield says that if you bought the same shares today you would earn 4.14% — the figure to compare with a bond, a savings account, or another stock. Forward yield is the only one that looks ahead, and the only one that is an estimate.
Why one base, and not three
A tracker can quietly show you three different “yields on cost” — trailing income over cost here, projected income over cost there, this year’s income over cost somewhere else — and on one real portfolio those three read 42%, 25% and 18%. The figures were all arithmetic; none of them was wrong; together they were useless, because a yield you cannot name the base of is not a yield.
FolioBright uses one definition everywhere. Yield on cost is income received this calendar year divided by the cost of what you hold now. Current yield is the same income divided by the portfolio’s value today, net of anything borrowed on margin. Forward yield keeps its own name and lives on the Income screen, where the next twelve months are projected payment by payment from each holding’s declared rate and cadence. Press any of the three cards and it shows the figures behind it.
Where the income comes from
Every yield starts with payments that actually landed: the dividends and distributions in your ledger, imported from a brokerage CSV or entered by hand, per account. Option-income funds count as the funds they are. Interest on cash counts as income on the cash account. Nothing is projected into yield on cost or current yield; the projecting is done by forward yield, and the dividend calendar shows each projected payment with its date and marks it as an estimate until the company declares.
Questions
What is yield on cost?
Yield on cost is the income a holding paid this year divided by what you paid for it. A stock bought at $40 that pays $2.40 a share this year has a yield on cost of 6.00%, whatever its price is today. It answers one question: what is the money I put in earning now?
What is the difference between yield on cost and current yield?
They share a numerator — the income received this year — and divide it by different things. Yield on cost divides by the cost of what you hold; current yield divides by what it is worth today. On a holding that has risen, current yield is the lower figure; on one that has fallen, it is the higher. FolioBright shows both, and names which is which.
What is forward yield?
Forward yield looks ahead instead of back: the next twelve months of payments, projected from each holding's declared rate and cadence, divided by the portfolio's value today. It is an estimate and is labelled as one; yield on cost and current yield are made of payments that have actually landed.
Does FolioBright count sold positions in yield on cost?
No. Yield on cost divides by the cost of what is held now, so a position you have sold drops out of both the income and the cost. Income from sold positions still counts in total return, where it belongs.