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

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.

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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.

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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.