The IRS Hates This: 4 High-Yield Stocks to Shield in Your Roth IRA
Some dividends get taxed twice before they reach your pocket, and the IRS takes its cut whether the market is up or down. Four high-yield stocks exist where the right account type legally eliminates that drag entirely.
Most dividends are taxed annually in a regular brokerage account, and some are taxed at higher rates than others. REIT payouts are generally taxed as ordinary income, and Canadian dividends lose a 15% withholding cut before they reach U.S. investors. A Roth IRA solves both problems. Under federal law, “any qualified distribution from a Roth IRA shall not be includible in gross income” (26 U.S.C. § 408A(d)(1)). The four high-yield payers below gain the most when the IRS can’t take a cut of the compounding.
Altria
Altria (NYSE:MO | MO Price Prediction) pays an annualized forward dividend of $4.44 per share. For $74.33, that works out to a yield of about 5.97%. The most recent raise lifted the quarterly payout to $1.11 from $1.06, declared on August 27, 2026.
Dividend safety: Full-year 2026 adjusted EPS guidance of $5.61 to $5.72 comfortably covers the $4.44 annual payout. Debt-to-EBITDA was 1.9x at June 30, below the company’s target of approximately 2x. Altria’s CFO said that “historically, after we have the dividend, we have about $1 billion excess in cash.” Shareholders’ equity is negative at −$2.618 billion, driven by years of buybacks rather than operating weakness. The quarterly payout has climbed from $0.61 in 2016 to $1.11 today.
Bull case: Marlboro still has pricing power. In the second quarter, price realization on smokeable products reached 4.5%, and Marlboro’s share of the premium segment held at 59.6%. The stock is up 35.13% year-to-date. Altria’s dividends are qualified, so the Roth advantage compounds: every reinvested payout grows without a tax bill along the way.
Risk: Domestic cigarette volumes fell an estimated 4.5% in Q2 after adjusting for trade inventory. NJOY ACE will not return to market in 2026, and Q2 adjusted EPS of $1.48 missed the $1.50 estimate.
Realty Income
Realty Income (NYSE:O) yields 5.43%. It pays $0.2715 a month, for an annualized forward payout of $3.258.
Dividend safety: Realty Income raised its 2026 AFFO per share guidance to $4.44 to $4.45, comfortably topping the annual dividend. (AFFO is the cash-earnings measure REITs use to fund their payouts.) Occupancy stands at 98.8%, and re-leased properties brought in 102.7% of their prior rent. The REIT has A3, A−, and A ratings from Moody’s, S&P, and Fitch. It is a member of the S&P 500 Dividend Aristocrats, with over 31 consecutive years of increases and 673 consecutive monthly dividends. Q2 marked its 115th consecutive quarterly dividend increase.
Bull case: Investment volume guidance rose to $10.0 billion. Q2 deals carried a 7.3% initial cash yield, and a $6 billion hyperscale data center joint venture adds a new source of growth. Realty Income is the strongest Roth candidate on this list because its distributions are nonqualified ordinary income. In a taxable account, you pay tax at your full marginal rate. Inside a Roth, they compound untaxed.
Risk: 65.7% of annualized base rent comes from tenants without investment-grade ratings, with net leverage at 5.4x adjusted EBITDA. The shares are down 0.34% over the past year, a reminder of how sensitive REITs are to interest rates.
Verizon
The only ultra-high-yield name here is Verizon Communications (NYSE:VZ). Its $2.83 annualized payout yields about 6.34% at $44.63.
Dividend safety: Adjusted EPS guidance of $4.99 to $5.04 covers the dividend with plenty of room. Free cash flow is projected at $21.94B to $22.14B for the year. In the first half, free cash flow of $10.2 billion covered $5.9 billion in dividends. Net unsecured leverage stands at 2.5x adjusted EBITDA, and Verizon paid off substantially all of Frontier’s debt 6 months ahead of schedule. Its dividend history shows a higher quarterly payout each year from 2011 through 2026, most recently raising it to $0.7075 from $0.69.
Bull case: Reduced spending on device subsidies is paying off. Adjusted EBITDA margin expanded to 40.1% from 37.1%, and Verizon added 184K postpaid phone customers. CEO Dan Schulman said, “We are growing our dividend, and we are paying down our debt.” AI infrastructure revenue is expected to start contributing in 2027.
Risk: Wireless ARPA, the average revenue per account, fell 1.4% year over year. Total unsecured debt stands at $136.5B, and total revenue slipped 0.7%.
Enbridge
Enbridge (NYSE:ENB) pays a quarterly dividend of C$0.97. Based on its U.S.-listed annualized payout of $2.784 and a price of $48.14, the yield is roughly 5.78%.
Dividend safety: Guidance for distributable cash flow (DCF) per share is C$5.70 to C$6.10, well ahead of the quarterly payout. Q2 adjusted EBITDA rose to $4.78B, and the secured backlog totals C$41B. CEO Greg Ebel pointed to “31 consecutive years of dividend increases.”
Roth angle: Canada’s tax agency states that individual retirement accounts (IRAs) are also exempt under Paragraph 2 of Article XXI of the Canada-U.S. tax treaty. That treaty article covers dividends paid to accounts that provide retirement benefits. In practice, the full Canadian payout can land in a Roth without the usual 15% cut. Confirm that your broker applies the exemption.
Bull case: After 2026, EBITDA, DCF per share, and EPS are expected to grow about 5% annually, supported by demand for LNG exports, utilities, and data centers.
Risk: Debt-to-EBITDA of 5.1x sits above the 4.5x to 5x target range. Exchange rates also move the US-dollar payout: it went from $0.712 in February to $0.696 in August.
Four Payers Built for Tax-Free Compounding
Each of these four companies covers its dividend with earnings or cash flow and has a history of increases. The tax benefits differ. Realty Income’s ordinary-income payouts and Enbridge’s Canadian withholding cost the most in a taxable account. Verizon and Altria offer the highest yields in this group, so you can put them to work compounding tax-free. The broader idea, building an income stream you never have to sell shares to fund, is the subject of a free dividend ladder guide we put together here. Keep an eye on Verizon’s leverage and Altria’s cigarette volumes heading into the next earnings reports.
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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.
