5 Dividend Stocks That Could Pay You $5,364 a Year Without the IRS Taking a Cut
A $100,000 dividend portfolio spread across five names generates thousands in annual income, but the account type you choose determines how much of that income you actually keep rather than hand over to the IRS every April.
At the 24% federal bracket, a $100,000 portfolio spread across five high-yield dividend payers makes $5,364 a year in gross income. Held in a taxable brokerage account, about $1,018 of that goes to the IRS every year. Held in a Roth IRA, the investor keeps the full amount.
Roth Versus Taxable on a $100,000 Dividend Portfolio
The model puts $20,000 into each of five stocks at its current yield. The two REITs pay ordinary dividends taxed at the full 24% marginal rate before any Section 199A deduction. The tobacco and telecom names pay qualified dividends that face a 0%, 15%, or 20% rate depending on income. A 24% bracket filer generally pays 15%. The 24% bracket applies to single filers with income over $105,700 ($211,400 for married couples filing jointly) in 2026.
| Stock | Yield | Income on $20,000 | Taxable-Account Tax |
|---|---|---|---|
| Altria Group (NYSE:MO | MO Price Prediction) | 5.94% | $1,188 | $178 |
| Philip Morris International (NYSE:PM) | 2.93% | $586 | $88 |
| Verizon Communications (NYSE:VZ) | 6.12% | $1,224 | $184 |
| Realty Income (NYSE:O) | 5.97% | $1,194 | $287 |
| W. P. Carey (NYSE:WPC) | 5.86% | $1,172 | $281 |
Inside a Roth, the portfolio returns $5,364 with no tax. In a taxable account, it clears about $4,346. Without any growth, that gap adds up to about $10,175 over 10 years. The two REITs alone account for about $568 of the tax bill, which is more than the three qualified payers combined ($450).
Why Each Name Fits a Roth
- Realty Income: Its ordinary dividends are taxed at the full bracket rate, so Roth location removes the largest drag. Realty Income raised its 2026 AFFO guidance to $4.44 to $4.45 per share, against an annualized dividend of $3.258.
- W. P. Carey: It also pays ordinary dividends, with a payout ratio management called “just over 70%”. It raised its dividend to $0.95 per quarter.
- Altria: Its dividends are qualified, but the yield is high enough to create a large taxable stream. Debt-to-EBITDA stood at 1.9 times, and the quarterly payout rose to $1.11.
- Verizon: It has the highest yield in the group. Management called the dividend “ironclad” and guided to free cash flow of $21.5 billion or more.
- Philip Morris: With the lowest yield and qualified treatment, it is the lowest Roth priority here. Expected operating cash flow of around $13.5 billion supports its progressive dividend policy.
How Much More Your Bracket Costs You
| Bracket | Taxable Net Income | Annual Roth Advantage |
|---|---|---|
| 22% | $4,394 | $970 |
| 24% | $4,346 | $1,018 |
| 32% | $4,157 | $1,207 |
| 37% | $3,889 | $1,475 |
The 37% row applies the 20% qualified rate. State taxes and the net investment income tax would increase every gap.
Compounding Turns a Yearly Gap Into a Permanent Cost
Each dollar kept from the IRS stays invested and keeps makes income, and qualified Roth withdrawals in retirement are tax-free. Reinvesting the 24% bracket delta at a conservative 4% grows it to about $12,217 after 10 years and $30,300 after 20 years. At 37%, the 20-year figure reaches about $43,923. No price appreciation is assumed in these figures. They measure the income lost by holding these stocks outside a Roth.
Plug your own bracket’s annual tax drag into the compounding engine to see how the gap scales:
Limits That Restrict Moving Everything Into a Roth
Annual contribution limits control how fast new money can enter a Roth, and income phase-outs block high earners from contributing directly. Converting traditional IRA assets adds the converted amount to gross income for the year of conversion. That is why asset location matters. Ordinary-dividend REITs gain the most from limited Roth space. Qualified payers and low-yield growth holdings lose less in taxable accounts.
Investors in higher brackets who have traditional IRA balances to convert gain the most. High earners without IRA assets, who are limited by the phase-out, have the least room to act. For a sense of what a mid six-figure balance can realistically throw off once the tax drag is removed, we outlined a full income plan in a free report.
Steps to Take Before Your Next Tax Filing
- Calculate this year’s tax cost at your bracket for any REIT in a taxable account.
- Model a phased Roth conversion that starts with ordinary-dividend payers, and compare the conversion tax with the 20-year income delta.
- If Roth space is full, check whether lower-yield holdings are taking up room that higher-yield REITs could use.
Contact [email protected] for any questions or corrections.
Chris Lange is a financial and geopolitical writer with more than a decade of experience covering a myriad of topics. He has published thousands of articles for 24/7 Wall St., with past coverage focused heavily on stocks, IPOs, healthcare, defense, global affairs, and technology.
His work has been quoted, or referenced by a number of outlets including Business Insider, USA Today, Yahoo Finance, MSN, The Motley Fool, and many other publications. A graduate of Southwestern University, he studied business with a focus on investments and has previous experience in banking and startups.
When not reading or writing the news, he is following his passion for Lacrosse, playing chess, or building solar projects with his dad.
