Buy-to-let could smash your wealth! I’d rather buy this FTSE 100 dividend grower

Stack of new bank notes
Stack of new bank notes

A hazard that we here at The Motley Fool regularly like to flag up is buy-to-let. It was the darling of investors for years, of course, as landlords exploited a backcloth of rocketing property prices, increasing rents and some lovely tax breaks.

I’m not as bearish as some of my fellow writers over the outlook for home prices in the near term and possibly beyond because of the UK’s colossal homes shortage. Whilst this means that property prices are not likely to sink, however, there’s little reason to see why they will explode at least over the medium term as a slowing domestic economy dents broader homebuyer confidence.

With those aforementioned tax benefits from HM Revenues and Customs being curtailed too, and landlords having to jump through more and more regulatory hoops, buy-to-let is becoming an increasingly problematic and expensive way to make your capital work for you.

In fashion

Consensus here at the Fool is that stocks and shares remain the best destination for your cash, and there are some exceptional growth shares on the FTSE 100 that could make the sort of brilliant returns that buy-to-let used to.

Take Associated British Foods (LSE: ABF), for example. Reflecting the stress currently smacking consumer spending power in the UK, City analysts are expecting earnings growth to slow to a crawl — or 1% — in the year to September 2019.

The long-term potential of the Primark owner is underlined by its forecast 10% profits jump in fiscal 2020, though. And this is undergirded by the retail division’s brilliant sales potential in foreign climes, as illustrated in recent trading numbers which showed eurozone sales (at constant currencies) rising a solid 5% in the four months to January 6, as well as a “strong” performance in the US where sales “were well ahead.”

The firm’s expanding presence in foreign climes may be the growth engine for ABF’s profits in the years ahead, though its resilience in its home marketplace during tough times provide an extra leg of support to its operations. Sales here rose 4% in the period to early January as its share of the domestic clothing market share “increased significantly.”

Check out that dividend growth

A forward P/E ratio of 17.9x may sit outside of the widely-regarded value watermark of 15x or below, but I would argue that this isn’t too demanding considering the long-term promise of Primark across the globe, not to mention the improving momentum of ABF’s other divisions.

What’s more, I believe the Footsie firm’s ultra-progressive dividend policy takes the edge off somewhat. It’s lifted annual dividends at a compound annual growth rate of 8% over the past decade, and City analysts are predicting more chunky growth to 47.1p per share this year and 51.5p in fiscal 2020, figures that yield a decent 2% and 2.2% respectively.

ABF has all the tools, then, to make stock pickers an absolute packet in the near term and beyond. In my opinion it’s a much better place to invest than buy-to-let now and most probably in the years ahead.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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.