when evaluating dividend yields investors must also be careful not to compare apples and oranges specifically just because a stock s yoc is higher than the current dividend yield of another company it does not mean that the stock with the higher yoc is necessarily the better investment that is because the company with the high yoc may actually have a lower current dividend yield than other companies 
in these situations the investor could be better off selling their shares in the high yoc company and investing the proceeds in a company with a higher current dividend yield considering yoc shows investors the long term benefits of stocks compared to bonds since bonds pay fixed interest rates rather than dividends that grow they have much less long term potential example of yield on cost yoc emma is a retiree who is reviewing her pension s investment returns her portfolio includes a large position in xyz corporation which her portfolio manager purchased 15 years ago for 10 share when it was purchased xyz had a current dividend yield of 5 based on a dividend of 0 50 per share in each of the 15 years that followed xyz raised its dividend by 0 20 per year it is expected to pay 3 50 per share this year its stock price has risen to 50 per share resulting in a yoc of 35 3 50 divided by the initial 10 share purchase price and a current dividend yield of 7 3 50 divided by the current 50 share price emma considers xyz to have been one of her most successful investments she takes satisfaction out of seeing the lofty yoc that it produces every year looking over the most recent report from her portfolio manager she was therefore shocked to find that they had sold the xyz position the manager reinvested the proceeds in abc industries a company with similar financial strength as xyz but with a current yield of 8 50 dismayed by this seemingly foolish decision emma calls her portfolio manager she asks why they sold a position yielding 35 in exchange for one yielding only 8 50 the portfolio manager explains to emma that she has made a common mistake rather than comparing yoc to the current dividend yield she should make an apples to apples comparison between both companies current dividend yields from this perspective switching to abc was perhaps a wise choice because it offered a higher yield on her money 8 50 versus 7 however the two companies dividend growth prospects are more important if emma wants to continue increasing the yield on cost 