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Why Adding a Retirement-Care Stock to an RRSP Makes Perfect Sense

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When somebody mentions “retirement investing,” the first thing that may pop into your head might be the carefully chosen investments you’ve set aside for your twilight years. After all, whether you’re stacking shares in a Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF), building wealth for your later years is a commonsense part of stock investing.

But how about investing in other people’s retirement? With the boomer generation clocking out and shuffling into comfy slippers en masse, retirement homes and services constitute a growth economy, and with a rapidly ageing population, there’s big money to be made from elder-care stocks. Let’s take a look at why adding an actual retirement-care business to an RRSP or other later-years stock portfolio makes a lot of sense.

Today’s pick for a retirement-care business investment

Investors looking for secure dividend payments in a recession-proof industry focused on elder care should consider stacking shares in Chartwell Retirement Residences (TSX:CSH.UN). Paying a modest but tasty 3.9% dividend yield, Chartwell Retirement Residences adds monthly income to a portfolio and has a range of defensive qualities to recommend it. Let’s take a quick look at a few of them.

First of all, Chartwell Retirement Residences is the largest provider of elder-care facilities in the country. It’s still growing, with several thousand extra suites coming online over the next year to support growing demand in the sector. In terms of income, its most recent quarter saw a huge growth spurt to the tune of $3.2 million compared with the previous year, generating a veritable property empire consisting of +200 housing complexes.

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A wide-moat business in a recession-proof industry

There’s little wonder that Chartwell Retirement Residences is generating so much income considering the exponential growth of its market. This is a rather euphemistic way of saying that as the population of the country grows, the elderly demographic is growing, too. Buying into a business that sees its bottom line improve purely by a naturally accelerating societal phenomenon makes a lot of financial sense, in other words.

With returns in the double digits over the last half a decade, investors can expect to see their investment mature at a steady pace over the coming years. If the stock is to be held long term (in other words, if you’re a young investor starting early on an RRSP), Chartwell Retirement Residences’s presence in four provinces should provide enough peace of mind that its stock can be bought and forgotten about, while generating monthly income that is likely to grow over the years.

The bottom line

Besides the poetry of adding a retirement stock to a retirement fund, it’s a smart play that will add wealth to your portfolio. Since a registered retirement plan can be started at any age, the stock detailed above could be a good fit for an investor just starting out with an empty Tax-Free Savings Account (TFSA) or a seasoned investor looking for last-minute monthly gains in a recession-ready industry.

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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned.

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