If you're a long-term investor, you’ve probably heard the term “Yield on Cost” (YOC) tossed around. It sounds fancy, but the idea is actually pretty simple—and useful. Yield on Cost is a way to measure the income you're making from an investment based on how much you originally paid for it, not what it's worth today.

Here’s how it works. Let’s say you buy a stock for $20 per share and it pays $1 a year in dividends. That means your yield on cost is 5% (since $1 is 5% of $20). Years go by and the company does well. It raises its dividend to $2 a year. You’re still holding the same stock, and you still paid $20 for it. Now your YOC is 10%, because you’re getting $2 a year on something that cost you $20.

The key benefit of looking at yield on cost is that it helps long-term investors see how their investments are growing over time. While new buyers might look at a lower yield based on the stock’s current higher price, you're getting a better return based on what you originally paid.

YOC can also give you a sense of which companies are consistently growing their dividends. If your income from a stock keeps going up, that’s usually a good sign the company is healthy and supportive of its investors. If you're building a portfolio to live off dividends someday, watching your YOC climb can help you feel more confident that your plan is working.

Of course, YOC has its limits. It doesn’t take into account what the stock is worth today or whether there might be better opportunities elsewhere. But as a simple way to track how your long-term investments are doing in terms of income, it’s a helpful tool for staying focused.

If you’re curious about tracking YOC or want to see some real examples, you can find more info through many investment blogs and finance websites.

In the end, Yield on Cost is just one piece of the puzzle. But for long-term investors, it’s a nice way to measure progress and see the rewards of patience over time. Keep an eye on it, and your growing dividends might just surprise you.