I’m looking to take advantage of the FTSE 100 dip to buy a dividend stock or two for this year’s Stocks and Shares ISA. I’ve done a lot of research but fancied a second opinion. So I called in artificial intelligence.
Like a lot of people, I like to play around with ChatGPT, but never take its conclusion seriously. As the chatbot itself confesses, it makes mistakes.
It also admits it’s not a stock-tipping service. Since I would never rely on a robot, that’s fine by me. Ultimately, I use my own judgement.
It gave me three FTSE 100 shares
I told my robot buddy I was looking for a stock yielding at least 4%, with a track record of increasing shareholder payouts. Ideally, I wanted something trading at a reasonable valuation. A spot of potential share price growth would be nice too. ChatGPT said: “No problem!”
Then it picked FTSE 100 insurer Legal & General Group, which was a problem, because I both own it and have written about it a lot lately.
I asked again and got Taylor Wimpey, which I also own and have written about a lot. So I asked ChatGPT to give it a third shot and this time it suggested insurer Phoenix Group Holdings (LSE: PHNX). Which I also own! I was thrilled to see AI and I are on the same page when it comes to dividend shares. That has to be a good thing, right? Maybe, although it’s clear the AI is just aggregating the views of real humans who write about stocks.
Still, I haven’t actually written about Phoenix lately, so here goes.
Inevitably, ChatGPT immediately zoned in on its stunning 10.2% yield, the highest on the FTSE 100. It also highlighted its “strong track record of progressive dividend increases and plans to continue delivering sustainable payouts”.
It added: “In its full-year 2023 results, Phoenix announced a 3% increase in its annual dividend, in line with its commitment to steady, inflation-beating income for shareholders.”
Phoenix publishes 2024 results on 17 March, so we’ll know on Monday whether it’s still sticking to that commitment.
Double-digit yields are famously fragile. While the board remains committed to shareholder payouts, I wouldn’t be surprised to see it freeze or cut the dividend unless conditions improve.
Will the share price ever grow?
Continued stock market volatility will hammer the value of the massive £290bn of assets Phoenix manages. But as ChatGPT points out, it has a trick up its sleeve. It specialises in managing closed-book life insurance and pension funds, which “means it generates steady, predictable cash flows, even in uncertain economic conditions.”
My chatbot chum also highlighted a reasonable price-to-earnings ratio of around nine. That seemed low to me. On checking, I get 15.5 times. Like ChatGPT says, it can make mistakes.
I was wary when I bought Phoenix last year. The stock has fallen 10% in the last six months, although it’s flat over one year.
I think Phoenix is worth considering for income seekers, but despite owning the stock, I’m not expecting much share price growth in the next few years.
I will look elsewhere for my ISA dividend stock purchase. Maybe one with a lower yield, and higher growth prospects. And this time I’ll do my own research.
