For long-term investors, this account is one of the most powerful wealth-building tools available – not because of what you put into it, but because of the time your money is allowed to build.
RRSP contributions reduce your taxable income today, while investments in the account grow on a tax-deferred basis. That makes the RRSP ideal for assets that are designed to rise steadily over decades, such as high-quality stocks.
Although withdrawals are generally taxable, programs like the Home Buyers’ Plan (HBP) and Lifelong Learning Plan (LLP) offer limited flexibility, reinforcing the idea that RRSPs are best reserved for long-term retirement goals.
Given the multi-decade time horizon, equities have historically delivered the strongest real returns despite short-term volatility. The key is choosing companies that are sustainable enough to survive economic cycles while continuing to grow cash flows. One TSX-listed company fits that bill particularly well.
Why RRSPs reward patient stock investors
The biggest benefit of an RRSP isn’t just the tax deduction, it’s continuous compounding. Dividends, distributions and capital gains can be reinvested year after year without being eroded by annual taxes. Over decades, this difference could be enormous.
That makes RRSPs great for companies that combine reliable income with long-term growth. Ideally, the company should generate predictable cash flows, have inflation protection and the ability to reinvest capital at attractive rates. Infrastructure assets often meet all three criteria.
A high-performance TSX infrastructure compounder
Brookfield Infrastructure Partners LP (TSX:BIP.UN) stands out as a stock that can be safely held in an RRSP for decades. It owns and operates critical infrastructure assets around the world, including utilities, transportation networks, energy infrastructure and data-related assets. These assets are typically regulated or contracted, creating stable and inflation-linked cash flows.
To be clear, Brookfield Infrastructure is not a low-risk utility. It operates globally, uses leverage and continually recycles capital by selling mature assets and reinvesting in higher return opportunities. This strategy involves execution risk, but it also delivers stronger long-term growth and higher returns than traditional utilities.
At recent prices below $48 per unit, Brookfield Infrastructure offers a cash distribution yield of approximately 4.9%. Analyst consensus estimates imply that the stock is trading at a discount of around 12% to intrinsic value, providing a reasonable entry point for long-term investors.
Growing income for retirement
Management targets annual growth in operating resources (FFO) per unit in excess of 10%, driven by disciplined acquisitions, operational improvements and capital recycling. This supports a long-term distribution growth target of 5-9% per year, while maintaining a sustainable payout ratio of 60-70% of FFO.
Over the past decade, Brookfield Infrastructure has achieved distribution growth of approximately 7% per year. Even assuming a conservative growth rate of 5% in the future, the current return in ten years would rise to almost 8% on a cost basis – an attractive income stream for pensions.
Long-term investors can further improve returns by accumulating units during market downturns and reinvesting distributions during recessions, accelerating income growth through compounding.
Takeaway for investors
Brookfield Infrastructure Partners offers a compelling mix of stable cash flows, inflation protection and long-term growth; features that perfectly match the RRSP’s multi-decade investment horizon.
For investors looking for another name that they can safely hold in their RRSP for decades while building a growing retirement income, Brookfield Infrastructure deserves serious consideration.
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