If you're a young investor, you have time on your side, and you (hopefully) won't have to rely on your investments as your primary source of income. As a result, you can focus on growing your portfolio for retirement, without being beholden to mature dividend-paying shares like Insurance Australia Group Ltd (ASX: IAG).
Here are two shares that, as a young investor myself, I would buy before Insurance Australia Group:
Retail Food Group Limited (ASX: RFG)
Retail Food Group owns several of Australia's biggest franchises, including Donut King, Gloria Jeans, Brumby's, Michelle's Patisserie, and Crust pizza. The company is still growing its franchise footprint in Australia, as well as rolling out franchises overseas in a variety of locations. Further profit growth has been generated by acquiring the businesses (coffee roasting and baking) that supply the company's franchisees.
As with some other franchise business models recently, this company has also come under market scrutiny which I believe could be why shares have been sold down recently. Still, with a 5.8% dividend at today's prices, Retail Food Group doesn't have to achieve a lot from here to be a market beater.
Nearmap Ltd (ASX: NEA)
Nearmap is an unprofitable aerial mapping company that is expanding in Australia and the US. Its products are designed to result in lower costs and greater efficiency at its customers, with the theory being that this will effectively wed them to the company's subscription business model. It appears to be working so far, with continued sales growth in both Australia and the US.
Nearmap enjoys very high gross profit margins on its sales and has a mountain of cash that will hopefully see it through to break-even and profitability. A highly scalable platform (each customer added requires a smaller increase in costs) should result in a greater percentage of each new sale dropping down to the bottom line as profit, which is wonderful for shareholders.
