Financial
Dividend Yield, Yield on Cost, Payout Ratio, and Sustainable Growth (g)
Evaluate dividend stocks with Current Yield, Yield on Original Cost Basis, Earnings Payout Ratio, and Sustainable Growth Rate ROE * (1 - Payout).
Current Yield vs Yield on Cost—plus safety check via Payout Ratio
Current dividend yield uses current share price; yield on cost uses the original per-share cost basis. Neither is total return.
Payout ratio describes dividends relative to earnings. ROE times retention is a simplified growth model under stable profitability and financing assumptions, not a dividend-safety test.
| Equity Income Metric ($3.20 Div, $64 Price, $40 Basis, $8 EPS, 15% ROE) | Formula | Result |
|---|---|---|
| Current Dividend Yield | =3.20 / 64.00 | 5.00% (0.05) |
| Yield on Cost (YOC) | =3.20 / 40.00 | 8.00% (0.08) |
| Earnings Payout Ratio | =3.20 / 8.00 | 40.0% (60% Retained) |
| Sustainable Growth Rate (g) | =0.15 * (1 - 0.40) | 9.00% (0.09) |
Dividend Yield, Payout Ratio, and Sustainable Growth formulas
The retention model assumes reinvested earnings earn the modeled ROE and financing proportions remain stable.
=ROUND(E2 * (1 - A2 / D2), 4)Current Dividend Yield vs Yield on Cost
Use CurrentPrice (B2) for market yield or CostBasis (C2) for personal Yield on Cost.
=ROUND(A2 / B2, 4)Additional worked calculation
Using the initial example inputs:
=ROUND(A2 / C2, 4)Additional worked calculation
Using the initial example inputs:
=ROUND(A2 / D2, 4)Inputs and interpretation
Use positive prices, cost basis and earnings for these interpretations. Dividend yield is not total return, and dividends can change. Payout ratio alone does not establish dividend safety. The ROE-times-retention growth model assumes stable profitability and financing proportions with no new external equity; maintaining leverage can require additional debt. It is not a guaranteed dividend-growth forecast.
Try the example
Use the original values or change them to test your understanding.