One should start investing early to enjoy the power of compounding. You don't require huge capital to start your investment journey. A disciplined and consistent investment approach can create considerable wealth over a longer time frame. An investment of $500 monthly, growing at an annualized rate of 10%, can create a wealth of $3.16 million over 40 years.

The "4% rule" of retirement states that one can safely withdraw around 4% of their investments in the first year of retirement and inflation-adjusted same dollar amount in subsequent years without fearing running out of money. With the interest and gains on the investments covering most withdrawals, your retirement savings can last over 33 years. Applying the rule, one can withdraw $126,327 annually, representing a monthly withdrawal of $10,527.

Meanwhile, investors should be careful when choosing stocks, as not all stocks can deliver desired returns. Against this backdrop, let's look at the following two Canadian stocks that can deliver over 10% of annualized returns in the long run.

Dollarama

Dollarama (TSX:DOL) is a discount retailer that operates 1,583 company-owned stores across Canada, with 85% of the country's population having at least one store within 10 kilometres. Supported by its extensive presence and compelling offerings, the company has been posting healthy same-store sales even during a challenging period. It has increased its store count from 652 in fiscal 2011 to 1,583 by the end of the second quarter of fiscal 2025.

Amid these store expansions and healthy same-store sales growth, the company's top line has grown at an annualized rate of 11.6% since fiscal 2011. Its net income had grown at 18% CAGR (compound annual growth rate), while its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) margin has expanded from 16.5% in fiscal 2011 to 31.7% in fiscal 2024. Continuing its upward momentum, the company's top line and net income have grown by 8% and 17.9% in the first six months. Supported by these strong financials, the company has returned around 800% over the last 10 years at an annualized rate of 24.6%.

Further, Dollarama has planned to add around 420 stores over the next six years to increase its store count to 2,000 in fiscal 2031. Given its capital-efficient business model, quick sales ramp-up, and lower pay-back period, these expansions could boost its top and bottom lines. Its subsidiary, Dollarcity, where Dollarama owns a 60.1% stake, has also planned to increase its store count to 1,050 by the end of 2031 compared to 570 as of July 28. Given these growth initiatives, I expect the uptrend in Dollarama's financials and stock price to continue, thus making it an excellent long-term buy.

Hydro One

Hydro One (TSX:H) is an electric transmission and distribution company, with 99% of its business fully rate-regulated, thus generating stable and predictable cash flows. Its unregulated business forms 1% of its total assets and 1% of its annual revenue, which offers additional growth opportunities. The company has grown its rate base at an annualized rate of around 5% since 2016, boosting its financials. The company outsourced specific activities and adopted strategic sourcing of materials and services, which led to cost savings of $1.46 billion since 2016. Amid its solid operating performances, the company returned around 134% over the last five years at an annualized rate of 18.6%.

Meanwhile, Hydro One has planned to invest around $11.8 billion from 2022 to 2027, expanding its rate base at an annualized rate of 6%. Amid these growth initiatives, favourable rate revisions, and cost-cutting initiatives, the company expects its earnings per share to grow at an annualized rate of 5-7% through 2027.

Moreover, the company, which has raised its dividend at an annualized rate of around 5% since 2016, could continue to raise its dividends at a CAGR of 6% through 2027. Meanwhile, its forward dividend yield currently stands at 2.62%. Considering all these factors, I believe Hydro One would be an excellent long-term bet.