"Yep" is a remarkably restrained reply for someone named "ILikeDividends"...
But I wanted to add that if you do invest in a taxable account, most dividends are taxed at a lower rate. Looking at S&P 500 data from a year or two ago, 100% of dividends were qualified. Meaning if you held that stock (or mutual fund that holds that stock) for 60+ days, you paid a lower 15% tax rate. Dividends are more tax efficient than interest in your bank account.
In addition for taxable accounts, AND a marginal tax rate of 10 or 15% ie married filing jointly < 77,000 taxable income, dividends for long term >1year holdings are taxed at 0% ( tax free).
Source lines 11 to 20 of the capital gains worksheet. US 1040 instructions , also at gocurrycracker.
I do have auto reinvest set in my Vanguard account, and it gets reinvested in my tIRA. Are you saying that if I opened Roth IRA and had Vanguard reinvest the dividends in my Roth IRA and my income < 77,000 taxable income (MFJ). I would pay no taxes on the dividends? Do I understand it correctly?
There are no taxes on dividends in any kind of IRA. You can't have dividends on stock held in a traditional IRA paid to a Roth IRA.
@markbike528CBX is talking about the 0% tax rate on qualified dividends which applies to qualified dividends on stocks held in a taxable account for people under a certain income level (income includes both earned and dividends/capital gains).
@terran has accurately restated what I was trying to say. I was trying to expand on MustacheAndaHalf's comment (the lower tax rate might be zero).
non-taxable accounts (tIRA, Rothschild, 401k, 403b etc) are free from taxes
within that account. As soon as money in those accounts even peek outside the confines of the account, tax and penalties apply. Transfers between non-taxable accounts are often taxable events.
most actions in taxable accounts trigger taxes. sale of assets, even to rebuy the same thing in the same taxable account, trigger taxes. Dividends likewise. That is why buy and hold performs better than churning the account.