OAS Concerns? 1 Top Green Energy Stock to Buy Now for a TFSA

Northland Power Inc. (TSX:NPI) is a key Canadian player in the green energy megatrend. Here’s why it’s a buy for a retirement-focused TFSA.

When it comes to retirement investing, one way to avoid the 15% Old Age Security (OAS) clawback is to pack stocks in your Tax-Free Savings Account (TFSA). Buying stocks for a TFSA built around retirement income requires a small amount of number crunching. However, it doesn’t have to be stressful, so long as CPP investors stick to just a few golden figures when building retirement wealth.

As the minimum income recovery threshold, $79,054, is the main figure to keep an eye on this year. Between that mark and the maximum income recovery threshold of $128,137, 15% is skimmed as pension recovery tax. By utilizing their TFSAs, pensioners can enjoy a little more income. Packing that extra $6,000 per year can make all the difference to a long-range retirement plan.

A green power play for a TFSA

The thesis for green investing is strong and getting stronger every week, as major corporations jump on the bandwagon. The push towards renewable sources of energy is no flash in the pan, though. A trillion-dollar sea-change in power production is already underway and represents one of the biggest — if not the single biggest — global growth megatrends.

Northland Power (TSX: NPI) is a smart way to tap into this trend. Its 4% yield is suitable for TFSA investing and can form part of a balanced spread of super Canadian stocks spread across key sectors. When combined with other key assets, such as banking, real estate, and natural resources such as metals and mining stocks, an investment in renewables can add stabilizing diversity in an international growth sector.

Divestiture of fossil fuels from funds could have some big names in energy going in decline the years ahead. By contrast, Northland Power is on a steep upward trajectory, meaning that while the stock is technically on the expensive side (see a price-to-book ratio of 7.6 times book), investors can also pack upside potential into their green power portfolios.

Northland Power utilizes clean-burning natural gas and green power resources including wind, solar, and biomass to generate electricity, making for a naturally defensive pick. While there is likely still some income to be squeezed from the oil patch, as a buy-and-hold strategy, renewables can offer the growth of a rapidly changing, highly defensive sector to low-risk investors.

Value, capital gains, peace of mind, the prospect of high growth — all of these are on offer here, plus that reasonably tasty dividend is just right for investors making careful contributions to an RRSP, TFSA, or other retirement plan. If time is of the essence, Northland Power ticks boxes there, too: With total returns of 128% expected within five years, this strongly diversified energy stock packs capital growth as well as accumulating passive payments.

The bottom line

Northland Power is a top Canadian player in the green energy megatrend and a strategic buy for a retirement-focused TFSA. From the simple resilience of green energy when faced with market uncertainty to the breakout growth of the broader green economy, a retirement investor can glean strategic benefits from a long-range, low-risk renewables play.

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

More on Dividend Stocks

Blocks conceptualizing the Registered Retirement Savings Plan
Dividend Stocks

What’s the Best Order to Withdraw Cash From Your TFSA and RRSP?

It makes sense to consider tax implications when planning income streams in retirement.

Read more »

groceries get more expensive as inflation rises
Dividend Stocks

2 High-Yield Dividend Stocks to Help Beat Inflation

These stocks offer yields that are well above the current rate of inflation.

Read more »

voice-recognition-talking-to-a-smartphone
Dividend Stocks

Down 25%, Rogers Pays 4.7%: What I’d Need to See Before Buying

Rogers’ price decline has lifted its yield, while cash-flow coverage and debt reduction determine whether the lower price is worth…

Read more »

young people stare at smartphones
Dividend Stocks

Canadian Telecom Stocks: Which of the Big 3 Is Your Best Buy Now?

Compare Canadian telecom stocks TELUS, BCE, and Rogers on dividends, cash flow, and debt reduction to see which looks like…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How to Structure a TFSA With $50,000 for Lifelong Monthly Income

Turn quarterly dividends into monthly cash by staggering payment schedules or accumulating dividends as cash.

Read more »

concept of real estate evaluation
Dividend Stocks

FHSA vs. RRSP: Which Is Better for First-Time Homebuyers?

The FHSA and RRSP can both help first-time buyers, but the repayment difference becomes important once mortgage payments begin.

Read more »

Piggy bank on a flying rocket
Dividend Stocks

Enbridge Is Solid, But the Bank of Scotia Has More Upside: Here’s Why I’d Buy It First

With improving fundamentals, an encouraging growth outlook, and a reasonable valuation, Scotiabank offers a more compelling investment opportunity than Enbridge.

Read more »

senior man and woman stretch their legs on yoga mats outside
Dividend Stocks

Retirement Savings in Your 50s: The Catch-Up Plan

These two Canadian dividend stocks could help investors in their 50s strengthen retirement savings through regular income and long-term growth.

Read more »