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The Ultimate Dividend Portfolio

By Tim Beyers - Feb 2, 2014 at 2:06PM

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How to make the most from the payers among the stocks you own.

There's no better place to hold dividend-paying stocks than in the confines of a retirement account, Fool contributor Tim Beyers says in the following video.

Why? Taxes. Each time you receive a dividend -- or a distribution from a publicly traded partnership or real estate investment trust, or REIT -- you're receiving income that can be taxed. That's true even if you reinvest the dividends to buy new fractional shares in the company paying you. (Pro tip: Many brokerages provide dividend reinvesting as a free service!)

As such, Tim says investors might do best to use a retirement accounts such as an IRA or a self-directed 401(k) to invest in dividend payers. You'll enjoy deferred taxes on all distributions, which means you can reinvest 100% of the proceeds in pursuit of ever-higher levels of income. Tim says following this very strategy has allowed him and his wife to develop a long-term position in Prospect Capital that, today, pays a better-than-20% effective yield.

He advises those just starting their pursuit of dividend payers to take a closer look at American Tower (AMT -0.04%), a Rule Breaking REIT whose principal business is to construct towers that host wireless radios for distributing cell service and other forms of broadband to areas that need it. How big is the opportunity? More than 4 billion people remain disconnected from the Internet as of this writing, a huge gap that American Tower can help to bridge.

Now it's your turn to weigh in. Which stocks are in your dividend portfolio? Please watch the video for Tim's full take and then leave a comment to let us know what you think.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Prospect Capital at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends and owns shares of American Tower. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

American Tower Corporation Stock Quote
American Tower Corporation
AMT
$277.68 (-0.04%) $0.11
Prospect Capital Corporation Stock Quote
Prospect Capital Corporation
PSEC
$8.10 (0.94%) $0.07

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