The Motley Fool

Forget buy-to-let: I think these 2 FTSE 100 dividend shares can help you retire early

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images.

The buy-to-let sector has experienced a hugely challenging period over the last few years. A combination of weak house price growth, higher taxes and changing regulations all mean that it may be more difficult to obtain a high return that helps you to retire early.

By contrast, the FTSE 100 appears to have a number of members that provide high yields, dividend growth opportunities and margins of safety. As such, now could be the right time to buy them, with these two large-cap shares offering the potential to help you bring your retirement date a step closer.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

British American Tobacco

Although tobacco companies such as British American Tobacco (LSE: BATS) face an uncertain future, they could deliver impressive returns.

A key reason for this is the growth potential within the reduced-risk product segment. This includes products such as e-cigarettes, which are becoming increasingly popular as consumers seek a less harmful alternative to cigarettes.

While the transition towards e-cigarettes may mean there is a continued decline in cigarette volumes over the medium term, British American Tobacco continues to enjoy a high degree of pricing power. This may lead to cigarette price rises and sales growth – even if volumes decline. And with e-cigarettes also offering growth potential, the long-term prospects for the wider industry may prove to be more positive than the stock market is pricing in.

With British American Tobacco’s shares trading on a price-to-earnings (P/E) ratio of just 9.5, they seem to offer a wide margin of safety. While potentially less robust in terms of their earnings resilience when compared to their historical performance, the growth outlook for shares in the company appears to be relatively encouraging.

Severn Trent

Shares in water services company Severn Trent (LSE: SVT) could also have a positive impact on your retirement plans. Although the wider utility sector has been somewhat unpopular over recent years as a result of regulatory and political risks being high, the company’s margin of safety could make it an appealing purchase for long-term investors.

For example, Severn Trent trades on a P/E ratio of 14. This is relatively low compared to its historic range, and suggests that investors may have priced in what could prove to be an uncertain period for the business. Likewise, a dividend yield of 5% indicates that the company’s income potential is relatively high, with it being around 75 basis points greater than the yield of the FTSE 100.

Furthermore, with the risks facing the wider economy being high, investor sentiment towards defensive shares such as Severn Trent may increase. Investors may become increasingly concerned about the return of capital, rather than the return on capital. As such, now could be an opportune time to buy a slice of the business, with it offering the potential to deliver improving long-term total returns that aid your retirement savings prospects.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Peter Stephens owns shares of British American Tobacco. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.