The Calculation Behind Why These Dividend Stocks Can Add $10,080 More Annually

May 23, 2026

Quick Read

Ares Capital (ARCC) offers a 10% yield, with a recurring income dividend supported by $0.55 of net investment income per share for Q1 2026. This makes it a strong candidate for Roth accounts, alongside JPMorgan Nasdaq Equity Premium Income (JEPQ) at 13% and JPMorgan Equity Premium Income (JEPI) at 8%. Both provide beneficial recurring income for tax-sheltered accounts.
A portfolio worth $500,000 generating an 8% blended yield could yield about $42,000 annually, resulting in roughly $31,920 after taxes at the 24% bracket. In contrast, with a Roth account, the full $42,000 remains untaxed, translating to a $10,080 annual difference that, if reinvested, could total around $127,000 over a decade.
Interestingly, analysts in 2010 who recommended NVIDIA only listed their top 10 stocks, and Ares Capital wasn’t included.

In the 24% federal tax bracket, for a portfolio generating $42,000 in dividend income, about $10,080 would go to the IRS each year. Meanwhile, in a Roth account, that figure drops to zero. The math is the same, with the only variability being the tax structure.

This illustrates the concept of asset placement. By placing high-yield ordinary income into a Roth, the federal tax burden on that income essentially vanishes.

Tax Delta: Roth and 24% Taxable

A $500,000 portfolio with an 8% blended yield would provide approximately $42,000 in gross annual income. For a taxable account, you would take home about $31,920 after taxes. Conversely, in a Roth, you’d receive the full $42,000, showcasing an annual difference of around $10,080. Over ten years without growth or reinvestment, this disparity accumulates to more than $100,000 in taxes not paid.

As previously mentioned, analysts in 2010 who recommended NVIDIA did not list Ares Capital.

Basket

The yields mentioned below are based on current distribution data. The allocation focuses on higher-yield investments (ARCC, JEPQ, JEPI) to achieve the necessary 8% blended yield for the $42,000 figure. Stocks with lower yields (such as MO, EPD, BTI, O) are accordingly underrepresented.

Ares Capital (NASDAQ:ARCC): 10% yield, distributing $0.48 quarterly. It pays ordinary profit dividends and is a prime candidate for Roth accounts. In Q1 2026, it reported $0.55 NII per share, comfortably covering the $0.48 dividend.
Main Street Capital (NYSE:MAIN): 6% yield, providing a monthly payout of $0.26 plus a quarterly surcharge of $0.30, continuing for 19 consecutive quarters.
JPMorgan Nasdaq Stock Premium Income ETF (NASDAQ:JEPQ): 13% yield. Normal income comes from option insurance premiums. A solid addition to a portfolio.
JPMorgan Equity Premium Income ETF (NYSEARCA:JEPI): 8% yield, similar to JEPQ’s profit structure focusing on the S&P 500.
MPLX (NYSE:MPLX): 8% yield. As a master limited partnership, it issues K-1 forms. UBTI issues may arise within an IRA, depending on custodian and ownership level. Quarterly distributions have increased to $1.0765 per unit.
Altria (NYSE:MO): 6% yield, distributing $1.06 quarterly. Though its qualified dividend status makes Roth shelter less urgent, the yield is still advantageous.
Enterprise Product Partners (NYSE:EPD): 6% yield. As an MLP, K-1 forms are issued. UBTI considerations apply similarly to MPLX within an IRA.
British American Tobacco (NYSE:BTI): 5% yield. The quarterly distribution for 2026 rose by 12% to $0.834851. The UK’s 15% withholding on ADRs is a significant concern for Roth accounts.
Realty Income (NYSE:O): 5% yield, maintaining its streak with the 114th consecutive quarterly increase and 670th consecutive monthly dividend, classifying distributions as ordinary income.

Bracket Multiplier

The total dividend income remains $42,000. The tax brackets vary, as do their impacts.

Bracket	Federal Tax	Net Taxable Amount	Loss Net	Annual Loss Advantage
22%	$9,240	$32,760	$42,000	$9,240
24%	$10,080	$31,920	$42,000	$10,080
32%	$13,440	$28,560	$42,000	$13,440
37%	$15,540	$26,460	$42,000	$15,540

For context, the yield on the 10-year Treasury is around 5%, meaning this portfolio’s yield is about 373 basis points higher than the risk-free benchmark.

Complex Insights

The annual delta is merely the starting point. If reinvested in a Roth at a conservative 5% interest rate, the annual tax savings of $10,080 for a 24% investor could lead to approximately $127,000 over ten years and about $333,000 over twenty years. There are no taxes on entry, during, or on exit from this account, illustrating the long-term costs of maintaining this portfolio in a taxable account.

Risks Worth Naming

Distributions are considered ordinary income, and having Roth shelter is crucial for this basket’s effectiveness.
EPD and MPLX issue K-1s, which requires careful consideration of UBTI within IRAs, based on custodian and ownership level.
BDCs can be affected by the credit cycle; for instance, ARCC’s accrual rate increased from 1.8% at the end of 2025 to 2.1% in Q1 2026.
JEPI and JEPQ limit upside through written options; JEPI recorded an 8% return last year, whereas JEPQ more closely followed Nasdaq’s performance.
Focusing too much on one income theme could expose the portfolio to simultaneous interest rate and credit shocks across various components.

What to Do

If any BDC or REIT in your basket is in a taxable account, evaluate the annual tax cost in your bracket before filing your next return.
Consider modeling a gradual Roth conversion, targeting ordinary income stocks (like ARCC, MAIN, JEPI, JEPQ, O) before moving on to qualified dividend stocks.
Before placing an MLP (such as EPD or MPLX) into your Roth sleeve, verify with your administrator whether it complies with UBTI rules for IRA holdings.