For Canadian investors looking to generate tax-free passive income, the Tax-Free Savings Account (TFSA) is the perfect tool. When structured strategically, a TFSA can provide reliable, compounding returns with zero tax implications. One obvious candidate for such a strategy is Brookfield Infrastructure Partners L.P. (TSX:BIP.UN) — a high-quality, dividend stock with global exposure. But how can you use your $10,000 TFSA effectively with BIP.UN at the core?
Let’s explore a structure that balances income, growth, and long-term stability.
Why Brookfield Infrastructure Partners?
Brookfield Infrastructure Partners is one of the world’s largest owners and operators of critical infrastructure assets — think utilities, transport networks, data centres, and midstream energy. These are the backbone of modern economies and offer long-term, inflation-linked cash flows.
BIP.UN has a strong track record of increasing its distribution annually, targeting annual increases of 5–9%. Currently, it offers a yield of close to 5.8%. Unlike many high-yield stocks, this yield comes from sustainable cash flows — not financial engineering.
Importantly, its global, diversified business helps insulate it from regional downturns, and its long-term contracts mean steady cash flow in all market conditions.
The $10,000 TFSA blueprint
Here’s one way to structure your $10,000 TFSA with a passive income focus, centred around BIP.UN:
Core Holding – 70% in BIP.UN (about $7,000)
This forms the income engine. With a 5.8% yield, $7,000 invested in BIP.UN generates about $403/year in tax-free income. That’s nearly $34/month deposited into your TFSA, compounding quietly and efficiently.
Plus, you benefit from annual dividend increases and capital appreciation. Over time, that $403/year could grow significantly even without adding new contributions.
Growth Enhancer – 20% in a growth ETF (about $2,000)
To complement your income stream, consider allocating 20% to a growth-focused exchange traded fund (ETF) — something like iShares Core Equity ETF Portfolio (TSX:XEQT), which is a simple and efficient way to gain exposure to a diversified basket of equity that’s automatically rebalanced.
Currently, it has 43% exposure to the United States, 25% to Canada, 6% to Japan, and about 2–4% each in the United Kingdom, France, Germany, Switzerland, and Australia. This particular ETF offers a distribution yield of about 2.9%, which is not bad, given its full focus on equity and long-term growth potential.
Cash or Short-Term Investment – 10% (about $1,000)
Reserve 10% as dry powder. You can hold this in a high-interest savings ETF like Global X High Interest Savings ETF (previously Horizons High Interest Savings ETF) that offers daily liquidity with yields that provide a higher interest rate than traditional savings accounts. This gives you optionality — for buying dips in BIP.UN or re-balancing if markets shift dramatically.
Reinvest, re-balance, and repeat
The secret sauce in using your TFSA for passive income is compounding — and that means reinvesting those BIP.UN distributions. For a hands-off approach, set up a Dividend Reinvestment Plan (DRIP) to buy more units every quarter.
Over a decade, with modest dividend growth and stock price appreciation, your $10,000 could grow substantially — all tax-free. Let’s not forget, your annual TFSA contribution room increases each year (indexed to inflation), so you can keep adding other solid dividend stocks to diversify your TFSA income stream.
Investor takeaway
Brookfield Infrastructure Partners is a textbook example of a high-quality asset built for a long-term passive income strategy. In the TFSA, where every dollar of dividend income and capital gain is sheltered from tax, the benefits are amplified. A carefully structured $10,000 TFSA with BIP.UN at its heart can be a great start to a reliable, growing, and tax-free income stream. Buying on market corrections could fuel faster growth in a shorter time.
