If there’s one gift investors should think about giving themselves this Christmas, it’s a Stocks and Shares ISA that produces bountiful passive income. So, which stocking-stuffers could deliver pure dividend gold next year?
I put ChatGPT to the test to see if it can design a credible dividend portfolio. The AI chatbot gave me solid stock picks to consider, but I’m not convinced about the logic behind others. Let’s unwrap its passive income ideas for 2026.
A feast of ISA income
ChatGPT divided its choices into two categories. First, it selected “dividend growth shares”, defining them as companies with strong pricing power, regular dividend hikes, and robust cash flows.
Three FTSE 100 stocks — Diageo, Unilever, and London Stock Exchange Group — made the cut. Curiously, every member of this trio has endured a share price decline this year. That’s a little odd for hand-picked suggestions for growth, but maybe the robo-researcher sees potential for rebounds in 2026. In fairness, they boast good dividend growth streaks, so I see the case for including them.
Next, the virtual stock selector presented “high-quality income shares”. ChatGPT assured me that these firms have higher yields, healthy balance sheets, and sensible payout ratios.
This time, I was guided towards considering Legal & General, National Grid, and HSBC. Their yields range between 4% and over 8%, packing a powerful passive income punch. They seem perfectly rational choices to me, and it’s good to see diversification across different sectors in the portfolio. However, dividends are never guaranteed, and the risk of cuts can be greater with high-yield stocks.
Nice stocks, wrong stocking
So far, I think ChatGPT has done a reasonable job. But I raised an eyebrow at its next proposals. It cited Microsoft and Apple as US stocks worth considering for next year’s ultimate passive income ISA.
Now, these are great companies that will feature in many British investors’ portfolios. Both are members of the prestigious ‘Magnificent 7’ club, which doesn’t happen by accident. However, I query their inclusion in a ‘best’ passive income portfolio. Their dividend yields are just 0.8% and 0.4% respectively. A handy bonus for shareholders, but hardly the main reason to consider owning them.
This is a great example of AI chatbots’ deficiencies, and it’s why I’d never blindly rely on their recommendations. ChatGPT’s a poor substitute for thorough, independent analysis or the considered thoughts of a well-informed human source.
A dividend cracker
One passive income heavyweight that didn’t feature in ChatGPT’s selections is British American Tobacco (LSE:BATS). But this stock deserves serious consideration, not least for its chunky 5.7% yield.
The tobacco giant delivered a strong share price gain in 2025, and I think it could repeat the feat next year. Operating margins over 40% are impressive, and the recent announcement of a £1.3bn share buyback programme adds further weight to the investment case.
That said, declining cigarette consumption’s a major challenge for the business. There are pressing questions about the company’s long-term future, which it’s seeking to answer with a range of alternative nicotine products, like vapes, heated tobacco, and oral pouches.
Nevertheless, an attractive valuation with a forward price-to-earnings (P/E) ratio of just 11.4 and consistently high cash flows make those risks tolerable in my view. That’s why I’m a shareholder!
