Your Canada Pension Plan payments will likely not be enough for you to retire comfortably in Canada and maintain your current lifestyle. Thankfully, the Canada Revenue Agency has many options for you to save and grow money on a tax-free basis.
The Bermuda-based Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP) is the perfect option for your Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP), depending on the other assets you currently own.
Double your stock market returns with Brookfield Asset Management
If you’re looking for stocks to buy for your TFSA or RRSP, you may be like many other Canadians who prefer to profit from Brookfield’s renewable energy investments through shares in the parent company, Brookfield Asset Management Inc (TSX:BAM.A)(NYSE:BAM).
Brookfield Asset Management is the best option for your TFSA because the robust and untaxed capital gains will grow your wealth faster than the S&P/TSX Composite Index. You’ll also be able to withdraw the money at any time without it increasing your taxable income for the year.
In the past 10 years, the stock price on Brookfield Asset Management has appreciated by nearly 500%. This dividend-paying stock has a history of returning substantial capital gains on the Toronto Stock Exchange. When you retire 10 years from now, your initial investment will be safe in this stock.
Brookfield Asset Management is the parent company of Brookfield Renewable Partners Limited Partnership. As such, you will receive the strong growth in the renewable energy sector along with the safety of a diversified asset management company with investments in real estate, finance, and infrastructure.
The five-year average dividend yield on Brookfield Asset Management stock is 1.36%, and the 52-week change in price is 47.19%. With a 6.89% return on equity and a positive profit margin of 5.55%, you can’t go wrong with this stock.
The next decade will be a winner for renewable energy stocks
Over the next decade, renewable energy will be one of the biggest winners in the stock market equities. Oil and natural gas are quickly fading in appeal in favour of green energy alternatives. Every Canadian should have at least one renewable energy stock in their retirement portfolio.
Brookfield Asset’s subsidiary, Brookfield Renewable Energy, is a limited partnership designed to hold Brookfield’s renewable energy investments. Thus, Canadian investors might need to file a Schedule K-1 every year.
Unlike other Brookfield limited partnerships, the company is based in Bermuda, which means that Canadians will never owe any U.S. income tax liabilities from owning units of Brookfield Renewable Partners.
Consider the industry allocations within your entire retirement portfolio
Brookfield Asset Management is the clear long-term winner, especially as it gives investors access to the returns of the whole Brookfield portfolio. Moreover, as it requires less paperwork, the tax implications of the stock versus the subsidiary are easier to understand.
Depending on the composition of your retirement portfolio and the proportion of various industries such as real estate and finance within all of your assets, you may want to stick with Brookfield Renewable Partners to avoid overweighting your portfolio with these industries. Otherwise, most Canadians will want to stick with the parent company, Brookfield Asset Management.
Owning the parent company still gives you access to the returns from Brookfield Renewable Partners, along with higher historical capital gains from diverse industries.
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 Debra Ray has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Brookfield Asset Management. The Motley Fool recommends BROOKFIELD ASSET MANAGEMENT INC. CL.A LV.