A $750,000 Roth IRA Portfolio Loaded With These Dividend Stocks Pays $47,800 a Year and the IRS Gets None of It
Six high-yield dividend stocks can quietly hand the IRS thousands of dollars every single year, but where you hold them changes everything. The bracket you sit in determines exactly how much you keep or surrender.
At the 24% bracket, a $750,000 portfolio spread across six dividend payers yielding 6% or more returns about $47,800 a year in gross income. Taxed at 24%, roughly $11,500 of that goes to the IRS every year. Inside a Roth IRA, the account keeps all of it.
Roth Versus Taxable: $11,500 a Year on One Portfolio
The model portfolio puts $125,000 into each of six stocks. Each yield below is the annualized forward dividend divided by the October 6 share price. The list leaves out MLPs and REITs, so every name pays a standard corporate dividend.
- Altria (NYSE:MO | MO Price Prediction): 6.49% yield. Altria raised its quarterly payout to $1.11 from $1.06. Because the dividend keeps rising, the tax bill on it grows each year for taxable holdings. In a Roth, each increase stays in the account.
- British American Tobacco (NYSE:BTI): 6.29% yield. The UK does not withhold tax on these dividends for U.S. holders, so the Roth gets the full gross dividend. At its recent Capital Markets Day, the company reaffirmed its midterm growth algorithm.
- Verizon Communications (NYSE:VZ): 6.18% yield on a $0.7075 quarterly payout. Verizon raised its full-year adjusted EPS guidance to $4.99 to $5.04, which gives a regular income stream more room to grow tax-free.
- Pfizer (NYSE:PFE): 6.25% yield. Pfizer expects no buybacks in 2026, so the dividend is the main way it returns cash to shareholders. That makes sheltering the dividend the key tax decision for this holding.
- United Parcel Service (NYSE:UPS): 7.06% yield, the highest in the group. The CFO said UPS is “still planning to pay out around $5.4 billion in dividends in 2026, subject to Board approval.” The highest yield also has the largest tax drag per dollar invested.
- Enbridge (NYSE:ENB): 5.99% yield, which rounds to 6%. Management cited 31 consecutive years of dividend increases. One catch applies: Canada can withhold 15% on dividends paid into a Roth, and you cannot claim that tax back as a credit from inside the account.
| Scenario (24% Bracket) | Roth IRA | Taxable Account |
|---|---|---|
| Gross income | $47,800 | $47,800 |
| Federal tax | $0 | $11,500 |
| Net income | $47,800 | $36,300 |
| Annual Roth advantage | $11,500 | |
| 10-year Roth advantage (no growth) | $114,800 |
Taxing all of the income at 24% is this series’ standard benchmark. All six stocks pay dividends that can qualify for lower tax rates if you meet the holding-period rules. For investors in the 22% to 32% brackets, qualified dividends are taxed at 15%, which brings the taxable-account cost down to about $7,200 a year. Enbridge’s withholding also narrows the gap: if Canada takes about $1,100 inside the Roth, the annual advantage at 24% falls to about $10,400.
Bracket Multiplier: Higher Earners Lose More Every Year
For married couples filing jointly, the 24% bracket covered taxable income from $206,701 to $394,600 under the IRS’s 2025 schedule. Here is the same portfolio at each major bracket:
| Bracket | Tax Cost | Taxable Net Income | Annual Roth Advantage |
|---|---|---|---|
| 22% | $10,500 | $37,300 | $10,500 |
| 24% | $11,500 | $36,300 | $11,500 |
| 32% | $15,300 | $32,500 | $15,300 |
| 37% | $17,700 | $30,100 | $17,700 |
Moving from the 22% bracket to the 37% bracket raises the annual cost of holding these stocks from about $10,500 to about $17,700. For top-bracket families, Roth location is the most valuable tool in this portfolio.
Compounding Turns $11,500 a Year Into $342,000
That annual gap compounds over time. Assume each year’s $11,500 Roth advantage is reinvested at a conservative 4%, which is below the current 5.28% 10-year Treasury yield. The dividends themselves stay flat in this model, and share prices do not change.
- 10 years: about $137,800, compared with $114,800 without reinvestment
- 20 years: about $341,800, compared with $229,600 without reinvestment
- After Enbridge’s withholding: about $124,300 at 10 years and $308,300 at 20 years
- Using the 15% qualified rate: the 20-year figure is still about $213,600
These numbers assume flat share prices. They show the permanent cost of holding these dividends outside a tax-sheltered account: the dollars paid in tax, plus everything those dollars would have made if they had stayed invested.
How to Measure Your Own Dividend Tax Drag Before Filing Season
- Multiply each high-yield position in your taxable account by its current yield, then by your bracket. That gives you the annual tax cost of each holding.
- Check whether your shares meet the qualified-dividend holding period. If they do not, use your full bracket rate from the table above. If they do, use the qualified rate to find your real gap.
- A staged Roth conversion model can rank holdings by yield, with UPS at 7.06% at the top of this group. Review Enbridge separately, because Canadian withholding inside a Roth cuts its advantage compared with the five U.S. and UK payers.
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Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
