Roth IRA or Taxable Account: How Much of $13,467 in Dividend Income Will You Actually Keep?

A $500,000 portfolio made up of six blue-chip dividend growers can generate thousands of dollars in annual income, but the account type you use decides how much of that cash stays with you.

At a 24% tax bracket, an equal-weight $500,000 portfolio of six dividend growth stocks produces about $13,467 in yearly dividends. In a taxable account, roughly $2,020 of that amount would go to the IRS each year.

Roth vs. Taxable: Six Dividend Growers Compared

For 2026, the 24% bracket applies to taxable income above $105,700 for single filers and $211,400 for married couples filing jointly. Each of the six stocks pays qualified dividends, which the tax code treats as net capital gain (26 U.S.C. § 1(h)(11)(A)). As a result, a taxpayer in the 24% bracket generally pays the 15% dividend rate rather than 24%. A Roth account still protects the full amount.

The Roth advantage comes to $2,020 per year. Over 10 years, assuming no growth and no new contributions, that adds up to $20,200.

Each holding represents about $83,333:

• Johnson & Johnson (NYSE:JNJ | JNJ Price Prediction): yields 1.95%, or $1,625 a year. The quarterly payout increased to $1.34 from $1.30, and each raise boosts the income stream protected by a Roth.
• Procter & Gamble (NYSE:PG): yields 2.66%, or $2,217. Its quarterly dividend rose to $1.0885 from $1.0568, and the quarterly record in the data goes back to 1999.
• Coca-Cola (NYSE:KO): yields 2.19%, or $1,825. The payout moved up to $0.53 from $0.51, and it has increased every year on record.
• PepsiCo (NASDAQ:PEP): yields 4.23%, the highest in the group, generating $3,525. It also creates the largest annual tax bill in a taxable account, making it the strongest Roth candidate here.
• McDonald’s (NYSE:MCD): yields 2.85%, or $2,375. The newly declared quarterly dividend of $1.93, up from $1.86, adds to the tax-free income stream.
• ADP (NASDAQ:ADP): yields 2.28%, or $1,900. ADP lifted its quarterly dividend from $1.40 to $1.54 to $1.70 in two consecutive steps, the fastest growth in this group.

Higher Tax Brackets Increase the Cost

The 3.8% net investment income tax applies once modified AGI exceeds $200,000 for single filers and $250,000 for joint filers (26 U.S.C. § 1411). High earners may also face the 20% qualified dividend rate. The table below assumes a single filer whose income is above the NIIT threshold in the 32% and 37% brackets.

Moving from the 24% bracket to the 37% bracket increases the annual tax hit on these holdings by more than half.

Compounding Widens the Difference

If the $2,020 annual savings are reinvested at a conservative 4%, the 24% bracket advantage grows to $24,252 after 10 years and $60,152 after 20. Without reinvestment, the 20-year total would be $40,400. At the 37% bracket, the 20-year total rises to $95,441.

These calculations assume dividends stay flat, so they likely understate the gap. All six companies have increased payouts within the past two years. Each raise makes the annual tax bill in a taxable account larger and increases the income a Roth keeps in full. In other words, these figures reflect the continuing cost of holding dividend growers in an account where distributions are taxed each year, before any growth is considered.

Steps to Take Before Year-End

• Review your 1099-DIV and multiply the qualified dividends from these six names by your actual tax rate, including the 3.8% NIIT if your MAGI exceeds $200,000 single or $250,000 joint.
• Rank taxable holdings by dollar tax cost instead of dividend yield. In this group, PepsiCo’s $3,525 income stream is the largest.
• If you are weighing a Roth conversion, compare the one-time conversion tax with the $60,152 20-year compounded difference at your own bracket.