Like many investors, I plan to top up my State Pension by generating a passive income from a spread of UK shares. I already hold a dozen dividend stocks, mostly from the FTSE 100, but wondered if I was missing anything. So I asked ChatGPT. Could it tell me anything new?
It may sound odd to ask artificial intelligence to produce a “world-class passive income portfolio” purely from the FTSE 100. Yet the UK’s blue-chip index has one of the most generous dividend yields in the world, averaging 3.25%, versus just 1.1% on the S&P 500.
FTSE 100 companies also generate more than three-quarters of revenues overseas, and the five stocks ChatGPT suggested undeniably have global reach. So here goes…
FTSE 100 dividend heroes
Its first pick was pharmaceutical giant GSK, which I actually own. Worryingly, ChatGPT called it GlaxoSmithKline, a name it dropped back in May 2022. How can I rely on research this outdated?
Its second pick, spirits maker Diageo, has been a disaster lately. The shares are down 57% over three years and 35% in the last 12 months. ChatGPT made no mention of this. While it yields 4.93% and the price-to-earnings (P/E) has plunged to just 13, this is a falling knife. I wouldn’t pick it for a five-stock portfolio. Only highly experienced, diversified investors should consider it.
I was happier with its third choice, British American Tobacco, which has a remarkable record of dividend growth and share price performance. It’s not a revelation, but a staple for anyone happy to invest in big tobacco.
The chatbot then went for another dividend staple, oil and gas giant Shell. Then blotted its copybook by getting this name wrong too, calling it Royal Dutch Shell, abandoned in January 2022. AI repeatedly makes basic errors when discussing stocks. It often get yields widely wrong too. Not to be relied upon.
I wouldn’t buy Unilever
ChatGPT’s final pick, consumer goods giant Unilever (LSE: ULVR), is one I actually sold from my Self-Invested Personal Pension (SIPP) six months ago, and haven’t regretted it for a moment. The shares are down 7% over 12 months, and 2.5% over five years.
In its generic way, ChatGPT praised its “portfolio of household brands”, citing Dove, Persil, Hellmann’s and Ben & Jerry’s (Unilever has just demerged Ben & Jerry’s, so that’s wrong too). The bot then followed this with more generic slop about its “truly international footprint” and “steady cash flows”.
What it ignored was board battles, activist investor threats and disappointing growth. Q3 results showed underlying sales up just 3.9% and volume growth of a mere 1.5%. The board’s reportedly considering selling UK brands Marmite, Colman’s and Bovril. I can see why. Regardless of their charms, none scream growth to me. More repositioning like this could drive a Unilever recovery.
The trailing dividend yield is a solid but an unspectacular 3.5%, and the P/E of 21.3 looks pricey given recent poor returns.
I won’t consider Unilever today, there are plenty more FTSE 100 stocks I’ll buy first. I’ll continue hunting myself, rather than relying on an accident-prone bot to pick them.
