A great way to generate a long-term passive income in retirement is to build a portfolio of FTSE 100 shares offering both dividends and growth.
Investors can do this inside a Stocks and Shares ISA, a Self-Invested Personal Pension (SIPP), or a mix of both. I’m on the hunt for companies that can deliver a reliable income stream for years, ideally decades.
Picking a retirement portfolio
I asked ChatGPT to list five ‘forever’ income stocks. I’d never rely on a chatbot to pick shares for my portfolio, but it’s fun to test them. Here’s what it said.
“Reliable income stocks need solid cash flows, ideally from essential services or products. They also need strong balance sheets with manageable debt and a record of consistent dividend payments.”
Can’t argue with that. ChatGPT’s first pick surprised me: business-to-business supplier Bunzl. Hardly the most prominent dividend stock. Then I remembered why. I recently bought Bunzl myself, and ChatGPT knows that. It’s feeding my own interests back to me, as AI systems often do. Still, having increased its dividend annually for more than 30 years, and available at a reduced price with the shares down 33% in a year, I can’t argue with Bunzl.
National Grid is a solid dividend stock
The next pick felt inevitable: utility giant National Grid (LSE: NG). Many see it as the perfect income stock, typically yielding between 4% and 5%, with regulated earnings and a solid history of share price growth.
Yet I wouldn’t buy it personally. It has to pour vast sums, up to £60bn, into preparing the electricity grid for the green energy transition. That’s an enormous burden, and if costs overrun it may need to raise more money from shareholders, risking dilution, or even trim the dividend.
Perhaps I’m being too negative. Its half-year results published on 2 October were in line with expectations, as they often are, and it has a brilliant long-term income record. National Grid’s role is fundamental to the nation’s energy infrastructure.
But my doubts highlight why investors shouldn’t blindly rely on AI to pick stocks for them. Machines struggle to weigh up the human factors such as caution, patience, risk appetite and personal experience, that shape successful real-world investing.
ChatGPT’s other picks
Cigarette maker British American Tobacco is one of the most reliable dividend payers, with a trailing yield of 5.9%. No surprise ChatGPT plumped for that. The shares have climbed 45% in a year. This should be a good long-term buy-and-hold to consider but recent growth is likely to fade.
ChatGPTs final two stocks — Aviva and Legal & General Group — are both strong income plays. Aviva is up 48% in a year and yields 5.36%, while Legal & General is up a modest 9.5% but pays a mighty 8.86% income. I like both, but I won’t hold them together in a five-stock portfolio as it’s too much concentration as both are in the same sector, financials. So that’s something else ChatGPT has suggested that I won’t do.
AI robots are a fun starting point but they can make mistakes and work on false assumptions. Investors should build a balanced portfolio over at least a dozen shares, to spread risk, and remember that a ‘forever’ income isn’t built in a day but takes time and patience.
