As Canadians face rising living costs and economic uncertainty, the quest for reliable passive income has become more crucial than ever. The Tax-Free Savings Account (TFSA) is one of the most powerful tools in a Canadian investor’s arsenal, offering a tax-sheltered haven for your investment income.
The TFSA contribution room has increased by another $7,000 in 2025, bringing the total cumulative contribution limit to $102,000. One low-cost way to create a stable and recurring source of passive income is by investing in quality dividend stocks that offer you an attractive yield. In addition to consistent dividend income, Canadian investors will also benefit from long-term capital gains over time.
For investors seeking to generate $5,000 in annual tax-free dividend income, infrastructure giant Brookfield Infrastructure Partners (TSX:BIP.UN) emerges as a compelling cornerstone holding. With its diverse portfolio of cash-generating assets spanning verticals such as transportation, utilities, midstream energy, and data infrastructure, the TSX giant has demonstrated remarkable resilience through multiple economic cycles.
Brookfield’s commitment to delivering steady distribution growth, targeting 5-9% annual increases and its current attractive yield, presents a strategic opportunity for TFSA investors to build a reliable tax-free income stream while maintaining exposure to global infrastructure development and inflation-protected cash flows.
So, let’s see how Canadians can earn $5,200 in tax-free income in 2025 by investing in Brookfield Infrastructure stock.
A TSX dividend stock to own in the TFSA
In the third quarter (Q3) of 2024, Brookfield Infrastructure reported funds from operations, or FFO, of US$599 million or US$0.76 per share, an increase of 7% year over year. This FFO expansion allowed it to raise dividend distributions by 6% to US$0.405 per share, indicating a healthy payout ratio of 69%.
However, the company’s bottom line swung to a loss of US$52 million, compared to a net income of US$104 million in the year-ago period. Brookfield attributed the loss to accounting items such as increased borrowing costs and mark-to-market losses.
Brookfield’s transportation business grew its FFO by 50% year over year to US$308 million due to volume growth and rate increases across rail and road networks. The data infrastructure business also increased FFO by 29% to US$85 million due to the expansion of tower and fibre operations.
What should excite investors is Brookfield’s massive runway for future expansion. It sits on a record capital backlog of approximately US$8 billion, suggesting plenty of organic growth opportunities. Brookfield is positioned to capitalize on these opportunities with US$4.6 billion in liquidity and well-structured debt (90% fixed rate with no significant near-term maturities).
Looking ahead, management remains confident in its ability to deliver 6-9% annual FFO growth, driven by a combination of inflation-linked rate hikes and new capital deployment.
Analysts tracking BIP stock expect adjusted earnings to expand from US$0.14 per share in 2023 to US$1.5 per share in 2026. Priced at 20 times forward earnings, the TSX dividend stock is quite cheap and trades at a 27% discount to consensus price targets.
The Foolish takeaway
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY |
| Brookfield Infrastructure | $31.79 | 3,208 | $0.405 | $1,299.24 | Quarterly |
An investment of $102,000 in BIP stock will help you purchase 3,208 company shares. Given an annual dividend of $1.62 per share, you would earn $5,196 in yearly payouts. If Brookfield Infrastructure raises these payouts by 7% annually, your annual dividends will double over the next 10 years, enhancing the yield-at-cost significantly.
This article is just an example of how the TFSA can be used to begin a passive-income stream. Alternatively, investing such a considerable sum in a single company does not offer diversification, making it a high-risk strategy. Instead, investors should identify other quality dividend stocks or dividend-powered exchange-traded funds to diversify equity holdings and lower overall risk.
