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

These two FTSE 100 (INDEXFTSE:UKX) stocks appear to be undervalued, in my opinion.

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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.

Should you invest £1,000 in SSE right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if SSE made the list?

See the 6 stocks

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.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

Are Lloyds shares still a bargain near a 52-week high?

Soaring Lloyds shares are red-hot right now. Charlie Carman analyses whether they still offer a cheap investment opportunity today.

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

£10,000 invested in Raspberry Pi shares at the beginning of 2025 is now worth…

Raspberry Pi shares offer something a little different for UK-focused investors. But while the minicomputer company surged after IPO, it’s…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

How much would a 40-year-old need to invest in an ISA to earn a £2k monthly passive income in retirement?

A balanced portfolio of FTSE 100 and S&P 500 shares could create healthy streams of passive income, says Royston Wild.

Read more »

Investing Articles

Up 95% this year, why has the Eurasia Mining (EUA) share price now crashed?

The Eurasia Mining (EUA) share price has been on a wild ride so far this year. What's going on and…

Read more »

Investing Articles

Up another 53% in a month! Can the Greatland Gold (GGP) share price keep rocketing?

The Greatland Gold (GGP) share price has enjoyed yet another dazzling month and Harvey Jones is captivated, while also warning…

Read more »

Investing Articles

Is the Tesco share price about to turn?

The Tesco share price fell last month on news that Asda was preparing for a price war. But our writer…

Read more »

Investing Articles

How much further can the Tesla stock price fall? This analyst thinks 50%

Tesla stock has slumped since its recent highs, and the analyst outlook is a bit glum. Is it one to…

Read more »

Investing Articles

3 top FTSE 100 shares to consider for a new ISA

The FTSE 100 is packed with top-notch companies that can form the building blocks of a quality Stocks and Shares…

Read more »