Yield on original cost (YOOC) is determined by taking the dollar amount that an investor receives in dividends over the cost paid for those securities. It is particularly relevant to dividend growth portfolios because as dividends grow so does the YOOC. Growing dividends take advantage of the power of compounding and reinvesting dividends. The other benefit is that companies with increasing dividends are often better risk-adjusted performers as well. Current yield can mask the underlying health of a business if, for example, a company is paying out more than it should in dividends in order to keep their current yield high.
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