Artificial intelligence is making inroads into just about everything these days, so why not use it in my search for dividend stocks?
I asked ChatGPT to dig out “three UK dividend stocks I should consider for further research“. The results were really quite interesting, both in the suggested stocks and what the automated brain saw (or didn’t see) as key points.
HSBC
It suggested HSBC Holdings (LSE: HSBA) as the UK’s largest bank. In fact, with a market cap of £155bn it’s the second-most valuable stock in the FTSE 100, only slightly behind AstraZeneca.
We’re looking at a forecast 5.7% dividend yield. At least, that’s what Yahoo! Finance says. ChatGPT seems to think it’s 7%.
My robotic assistant picked up on the risk HSBC faces from a possible Chinese economic slowing and US-China trade uncertainties. But it also told me about spare cash the bank could use from selling its Canadian operations to support dividends.
Oh, hang on, it links to its source… It got that snippet from something my Motley Fool colleague Mark Hartley wrote in September 2024. That’ll be where it got the 7% dividend from too — the rising share price has lowered it since then.
Legal & General
Next up is Legal & General (LSE: LGEN) with a forecast 8.8% yield.
ChatGPT didn’t identify any specific risks. It does highlight a high dividend payout ratio, which is good for the cash. But it’s also doesn’t provide as much of a safety buffer as some others. I’d generally prefer a lower dividend today but with a safer progressive outlook than one with maybe less confidence.
At full-year results time in March, the company lifted its full-year dividend by 5% and launched a £500m share buyback for 2025. So the immediate cash prospects look good.
I think we could see share price weakness from what might be one of the more volatile stocks in the sector. But if I didn’t already hold Aviva, I think I’d be wanting to buy.
Phoenix
Described as “the only FTSE 100 company offering a double-digit dividend yield“, Phoenix Group Holdings (LSE: PHNX) is the third suggestion. That’s out of date too, with the share price performance dropping it to 8.9% now.
Phoenix posted losses in 2024, and we’re looking at dividends that aren’t currently covered by earnings. But ChatGPT pointed to strong cash generation and solid solvency measures as plus points. Ah, I see it got that from Motley Fool writer Royston Wild.
There’s some pressure on the strategy of acquiring and managing closed funds as the supply of those dries up. But plans to expand horizons should hopefully help with that.
This is another that I’d have near the top of my wanted list if I wasn’t already heavy in financial stocks.
AI expertise?
I think this exercise produced three strong dividend stock candidates. And obviously I’d say ChatGPT has used high-quality sources!
But it uses out-of-date information, and it overlooked some important issues. Still, as a quick stock screen on which to base further up-to-date personal research, it gets a nod from me.
