Yield On Average Cost

[AssetHound]

I want to calculate a yield based on the total distributions received (btw) or the projected annual income, whichever is greater, compared to the average cost of shares still held including reinvestments. This yield should be comparable to the published yield for a security and used for replacement decisions. I usually run this as a YTD report.

I guess I should include both received and reinvestment distributions in the numerator?

I already calculate a yield based on OOP cost.

Having a little trouble. Help?

[Mark]

Hi AssetHound,

Are you trying to write a user-defined custom report field? Can you choose which fields you're trying to utilize and write them into an equation that does what you want?

[Bsrr]

Hi Mark - I was looking in FM to see if there was a Yield On Cost field that could be selected for a reporting and did not see one. I found this thread in the Board Index but without any follow up from the original requestor.

If there is no Yield On Cost calculation natively in FM can you advise how I might create one? I am thinking that this could get a bit complicated depending on if you have retained all positions over the selected time frame (including reinvested dividends) or happen to have sold some positions along the way and how that would be calculated.

Anyway, any suggestions appreciated. Or better yet can you build Yield On Cost into FM?

[Mark]

Hi Bsrr,

How do you define "Yield on Cost"? This sounds similar to our "Return On Investment (ROI)" yields, which are time and money weighted returns on your invested dollars. For more detail on both ROI and TWR yields, and when/how to use them, see Yield Calculations.

[Bsrr]

Below is the formula I am interested in. I do understand ROI and TWR but they would be different than trying to arrive at what your yield on cost is over time on a dividend paying asset.

Example (silly one): I buy 10 shares of X for $1/share for total of $10. Then X pays me an annual dividend of $1 (10% dividend) that I reinvest and purchase 1 more share @ $1. I now have 11 shares and at the same 10% dividend receive $1.10 the next year. Per below my YOC is now:

YOC = ($1dividend/(10 cost basis per share/11 shares) = 0.9091) X 100 = 10.9% YOC

The formula for computing Yield on Cost (YOC) for a dividend-paying stock is:

YOC = (Annual Dividend per Share/Cost Basis per Share) X 100

Where:
• Annual Dividend per Share is the total dividend paid per share over a year.
• Cost Basis per Share is the original purchase (OOP cost) price of the stock per share.

This formula expresses the annual dividend income as a percentage of the initial investment cost, providing a long-term perspective on the return from dividend growth.

Can I create this formula in FM myself? Or can FM support this as a new feature?

Thanks.

[Mark]

Hi Bsrr,

Thanks for the nice explanation. This isn't a built-in field currently, but it could be added in the future. Yes, you could calculate this now with a user-defined custom report field (Pro/Adv versions only). See the Custom report fields:

Projected annual income
Out of pocket basis (current)

and define a field like this:

Projected_annualincome/OOPCbasis_end*100

The Projected annual income requires you to edit the "Income" properties of your investments to tell it the expected dividends. You could also use something like: Dividend distribution (between) and leave the date range of the report set to 1 year. This way you can calculate YOC based on last year's received dividends, and not have to set the properties of the investments.

[Bsrr]

Thanks for the response.

When you see a feature request from customers and assuming you think it is worth building into FM do you have a product roadmap process whereby you might be able to predict when that feature might become available? Would be cool to have a native YOC "field" in FM and if so can you advise when that might happen (assuming you are thinking it is a feature worthy of development in the future).

In the meanwhile, I will take a look at your solution recommendation and decide if Pro is worth the extra money for me so that I can implement YOC, I do already fill in the "income" properties for all assets that pay any dividend or interest so that I can forecast forward potential income streams.

Thanks.

[Mark]

Hi Bsrr,

We do keep track of all new potential features. I can't say the process is sophisticated enough to predict if/when a particular feature will be added though.