$400,000 in Dividend Stocks: How a Roth IRA Could Save You $3,780 a Year

Split $400,000 equally across six high-yield dividend stocks, and at today’s prices, the portfolio generates about $20,890 a year. If you’re in the 24% bracket and hold it in a taxable account, about $3,780 of that goes to taxes annually.

Six Stocks Ranked by How Much a Roth Saves

About $66,667 is allocated to each position. Each yield is the forward annual dividend divided by the current share price. The tax figures are for tax year 2026, when the 24% bracket starts above $105,700 of taxable income for single filers and $211,400 for joint filers.

• Main Street Capital (NYSE:MAIN): 5.58%, considering only the regular monthly dividend. Supplemental payouts raised trailing 12-month distributions to $4.34 per share. BDC payouts are taxed as ordinary income, so this position has the biggest tax drag of the six.
• Omega Healthcare Investors (NYSE:OHI): 5.60%. REIT dividends are taxed as ordinary income. Section 199A lets you deduct 20% of qualified REIT dividends, bringing the effective rate down to 19.2% in the 24% bracket.
• Realty Income (NYSE:O): 5.49%, paid monthly. The company recently announced its 116th consecutive quarterly dividend increase, and every increase raises the tax bill when shares are held outside a tax-advantaged account.
• Verizon (NYSE:VZ): 6.15%, the highest yield here. Its dividends are qualified, though, so they’re taxed at 15% for most filers.
• Altria (NYSE:MO): 5.91%, paid as qualified dividends. Its August raise was the 61st dividend increase in 57 years.
• Exxon Mobil (NYSE:XOM): 2.60%, paid as qualified dividends. It’s the weakest case for Roth location in this group.

Stock Annual Income Tax Treatment Annual Tax at 24% MAIN $3,720 Ordinary $890 OHI $3,730 Ordinary (REIT) $720 O $3,660 Ordinary (REIT) $700 VZ $4,100 Qualified $620 MO $3,940 Qualified $590 XOM $1,740 Qualified $260

Verizon pays the most income of the six, but Main Street costs the most in tax; how a payout is taxed matters more than the yield.

Roth Versus Taxable at the 24% Bracket Account Gross Income Tax Cost Net Income Roth IRA $20,890 $0 $20,890 Taxable $20,890 $3,780 $17,110

The Roth comes out about $3,780 ahead each year. Over 10 years, that adds up to $37,780, without considering any growth or new contributions. Both state income tax and the net investment income tax are excluded, and both would widen the gap.

How the Gap Grows in Higher Brackets

The model taxes qualified dividends at 15% in the 22% through 32% brackets and at 20% in the 37% bracket. The top bracket starts above $640,600 for a single filer.

Bracket Taxable Net Income Annual Roth Advantage 22% $17,300 $3,590 24% $17,110 $3,780 32% $16,340 $4,550 37% $15,370 $5,520

Main Street, Omega, and Realty Income account for nearly all of the increase from one bracket to the next. Their distributions are taxed at your full marginal rate, or most of it.

What Compounding Adds Over Time

Say you reinvest the $3,780 you save each year at a conservative 4% return. After 10 years, it grows to about $45,360. After 20 years, it makes $112,510, compared with $75,570 if you just added up the savings without reinvesting. These numbers assume no share price gains and no dividend raises. They show only what holding these six stocks outside a Roth costs you.

What to Do Before Your Next Tax Filing

• Look at Form 1099-DIV and add up the income that isn’t qualified when you hold Main Street, Omega, or Realty Income in a taxable account. Multiply that by your bracket rate to see your yearly tax cost.
• In a phased Roth conversion, the positions that pay ordinary dividends carry the largest tax savings, while qualified payers such as Exxon Mobil carry the least. The quiet period after your working years and before your first RMD is usually the cheapest time to move them, a window we sized up in a free Roth guide.
• Before you decide a conversion costs too much, compare the one-time tax on converting these specific positions with the 20-year figure above for your bracket.