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Forget buy-to-let: I think these 2 FTSE 100 dividend stocks can help you make a million

With the prospects for the buy-to-let industry being somewhat uncertain at the present time, buying FTSE 100 dividend shares could prove to be a sound move.

They offer greater diversity and, in many cases, may produce higher income returns than property over the coming years. Furthermore, with relatively low valuations, large-cap stocks could offer a superior risk/reward opportunity when compared to residential property at the present time.

As such, now could be the right time to buy these two FTSE 100 stocks. They appear to be undervalued, which could mean that they offer a greater chance of helping you to make a million than a buy-to-let investment.

ITV

The near-term prospects for the ITV (LSE: ITV) share price are highly uncertain. Demand for TV advertising has been weak as a result of the challenging outlook for the UK economy. This situation could persist in the near term, and may mean the company’s bottom line growth prospects are somewhat limited.

Despite an uncertain future, ITV’s income and capital growth potential could prove to be high. The stock trades on a price-to-earnings (P/E) ratio of just 7, which is relatively low compared to its historic range. Meanwhile, a dividend yield of 7.4% is around 3 percentage points higher than the FTSE 100’s income return. It is also likely to be in excess of the income returns that are available on the vast majority of buy-to-let investments at the present time.

With ITV continuing to invest in its streaming and digital opportunities, the company could deliver growth once the wider economy’s performance improves. For long-term investors it could prove to be a worthwhile purchase at the present time.

Aviva

Also trading on a relatively low valuation and offering a high income return is FTSE 100 life insurer Aviva (LSE: AV). Although it could be impacted by the uncertain prospects for the UK economy, it is a geographically diverse business that has improving growth opportunities from a variety of markets.

Its P/E ratio of 6.1 indicates that it offers a wide margin of safety. Moreover, the company is due to post a rise in earnings of 8% in the current year, while a strategy of reducing debt could limit its risks over the medium term.

Aviva’s dividend yield of 8.5% is almost twice the income return available on the wider FTSE 100. Although risks to the UK and global economies could weigh on its market valuation in the short run, its track record of growth suggests that its total returns may prove to be higher than those of the wider index in the long term.

Millionaire potential

As such, buying shares in Aviva and ITV instead of investing in buy-to-let properties could be a sound move. Not only could they deliver higher returns, their risks could be lower as a result of their geographic diversity during an uncertain period for the UK economy.

In fact, both stocks could realistically command ratings that are double their current levels over the long run. This would entail a 100% rise in their current market valuations. Alongside the prospect of high income returns that are compounded annually, the two companies could provide a significant boost on your way to a £1m portfolio.

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Peter Stephens owns shares of Aviva. The Motley Fool UK has recommended ITV. 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.