Young Investors: How I’d Allocate $10,000 for Long-Term Potential

Young Canadians can achieve financial independence faster by saving and investing early.

“As early as possible.” That is the answer most financial experts give young folks who ask when the best time to start saving and investing for the future is. An enormous pile of money awaits people with solid financial habits and long-term investment horizons.

You can start with little capital and then allow the power of compounding to come into play. Your meagre financial resources can generate more money through investing. The amount should grow immensely in a longer time frame.

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Preferred strategy

Dividend investing is the preferred investment strategy for long-term potential. However, stock selection is crucial because there should be no room for error. Your stock holdings must have the financial strength to endure or overcome economic downturns and be reliable dividend payers.

Enbridge (TSX: ENB) and First National Financial (TSX: FN) are no-fail choices for their lengthy dividend-growth streaks. Given the average dividend yield of 6.415%, a combined $10,000 investment ($5,000 in each stock) will balloon to approximately $62,700 in 30 years.

The overall money growth, including dividend reinvesting, is about 627.13%. Enbridge pays quarterly dividends, while First National’s payout frequency is monthly. The assumption here is you don’t collect dividends and instead reinvest them every quarter or monthly.

Low-risk cash flow profile

Enbridge has an aristocratic status or belongs to the cream of the crop owing to its industry standing and 30 consecutive years of dividend increases. At $59.78 per share, the dividend offer is 6.11%. The most recent increase to shareholders of record on February 14, 2025, was 3%.

The $134.5 billion energy provider has four core franchises. Its businesses include liquids pipeline (50%), gas transmission (25%), gas distribution (22%), and renewable power (3%). Cost-of-service or contracted assets account for 98% of Enbridge’s earnings before interest, taxes, depreciation, and amortization (EBITDA).  

The diversified first-choice assets, high system utilization, and highly contracted cash flow structure support consistent dividend payments and annual growth. Enbridge has achieved financial guidance every year for the last 19 years. Management is confident that the diversified business mix can meet growing demand.

Regarding U.S. tariffs, Greg Ebel, chief executive officer (CEO) of Enbridge, said, “It would take a very long time of sustained tariffs before you see changing trade patterns and flow patterns. It would be very difficult for them to find other sources of supply.”

Perfect complement

First National is considerably small compared to Enbridge, but it’s the perfect complement for building wealth. The $2.23 billion financial services company is a pure mortgage lender (commercial and residential). This mid-cap stock trades at $36.37 per share and pays a lucrative 6.72% dividend.

Net income in 2024 declined 19.5% to $203.4 million compared to 2023. However, cash provided by financing activities soared 305.1% year over year to $663.7 million. Its president and CEO, Jason Ellis, said, “First National’s 2024 performance reflected the resilient nature of our business in the context of changing market and competitive conditions.”

First National boasts an 18-year dividend-growth streak. The board also declares a special one-time dividend at year-end, depending on financial performance.

Motivating factor

The benefits of investing early are numerous, but the motivating factor is the opportunity to achieve financial independence sooner rather than later. Enbridge and First National Financial are suitable options for young investors.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool recommends Enbridge. The Motley Fool has a disclosure policy.

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