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Forget buy-to-let! I’d buy these 2 FTSE 100 dividend growth stocks in an ISA today

With house prices falling in London and the South East, the outlook for the buy-to-let sector is uncertain at present. As such, investors in the sector may be unable to generate the strong capital growth enjoyed in the past, while also seeing their net incomes fall due to tax changes.

As such, investing in FTSE 100 stocks that have solid track records of dividend growth could be a shrewd move. They may offer scope for a high income return, as well as the potential for capital growth. With that in mind, here are two large-cap shares that could become increasingly appealing income opportunities over the long run.

Compass Group

Over the last four years, support services company Compass Group (LSE: CPG) has increased dividends per share by over 9% per annum. It has been able to do so due to its consistently-rising bottom line, with the company’s strategy focused on generating efficiencies and simplification. As part of this, it has made disposals while also engaging in acquisitions. This could provide it with a stronger growth opportunity in the long run.

Since Compass Group’s dividend payout is currently covered 2.1 times by net profit, it seems to be highly affordable. Therefore, the company may be able to increase dividends at a similar pace to profit growth without hurting its financial position over the medium term.

With the company’s bottom line due to rise by 9% in the current year, its potential to become an increasingly appealing income share remains high. Therefore, despite a dividend yield of just 2.1%, it could be a worthwhile income investing purchase.

Ferguson

Plumbing and heating specialist Ferguson (LSE: FERG) continues to reap the benefits of a rapidly-growing US economy. In its most recent quarter, the firm recorded a rise in ongoing revenue of 8.4% in the US. It has also been able to improve gross margin, while maintaining its strong financial position. This should provide it with scope to make further acquisitions that could improve its long-term growth outlook.

Over the last four years, Ferguson has increased dividends per share at an annualised rate of around 15%. Despite such a rapid rate of growth, its shareholder payouts are currently covered 2.8 times by profit. Alongside its improving financial prospects, this suggests dividends could increase at a rapid rate over a sustained period of time – especially with its relatively strong cash flow.

While the stock may have a dividend yield of just 2.4% at the present time, its shareholder payouts could be relatively high over the long run due to their growth potential. As such, with the US economy forecast to continue its strong growth rate, now could be the right time to buy a slice of the business from both an income and growth perspective.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Compass Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.