It’s possible to get yields of 7% or 8% from UK dividend stocks today, with capital growth potential too. But which ones to choose?
For a bit of fun, I decided to call in ChatGPT. I’d never seriously use artificial intelligence to pick stocks, it’s prone to making simple errors and using outdated info, but I thought it might highlight a few opportunities I’d missed, and could then research myself.
I asked it to list five stocks from the FTSE 100 and FTSE 250, all with yields of 7% or more. The results, as ever, were patchy.
Phoenix Group Holdings tempts
First, I explicitly asked it not to include Legal & General Group. It has the biggest yield on the FTSE 100 right now, at 8%, and I knew it would go straight for that. I’ve written about it the insurer a lot lately, so wanted something fresh. It gave me Legal & General anyway!
I requested a replacement and it went straight for another FTSE 100 financial stock, insurer Phoenix Group Holdings (LSE: PHNX). Mind you, that’s hard to ignore. I bought it myself in 2024 when it was yielding 10%. The shares have soared 51% in the last year, with that bumper yield on top.
ChatGPT made a very familiar error, highlighting its recent 8% yield. Following the share price surge, that’s now dipped to 7.3%, but it’s still nicely above my target.
With a price-to-earnings (P/E) ratio of 22.7, Phoenix isn’t as cheap as it was, and the shares could idle from here. It must work hard to maintain the cash flows required to support that yield, and a stock market crash would be a blow, as it has £300bn of assets under management. But I still think it’s well worth considering for the income.
Next, ChatGPT highlighted yet another FTSE 100 financial, wealth manager M&G. The chatbot is clearly using out-of-date information, highlighting a 7.8% trailing yield that’s now retreated to 6.8%, thanks to its fast-climbing shares. Again, M&G may be worth considering though.
High income shares
Finally, my robot ‘buddy’ looked beyond the financials sector and named FTSE 250-listed housebuilder Taylor Wimpey, hailing its 9.2% yield (which is actually 8.7% today).
The share price has done horribly lately but I think a housebuilding sector recovery is long overdue and with a P/E of 12.9, Taylor Wimpey is worth considering.
Finally, ChatGPT highlighted a couple of high-yielders from the FTSE 250 that haven’t crossed my radar. The first is Ithaca Energy, which it says yields 11.4% (it’s actually 8.5%) and Bluefield Solar Income Fund, which it says yields 10.7% (I’m seeing 12.9%).
It warned that Ithaca is subject to “commodity price volatility which makes the dividend less predictable”. Having got badly stung by smaller oil companies in the past, this is too risky for me. And while ChatGPT says Bluefield offers “stable income from long-term renewable energy assets”, I’ll do my own research here, rather than rely on a bot.
They are clearly some fabulous yields out there. As ever, the key is to check whether they’re sustainable. But I think Phoenix, M&G and Taylor Wimpey are all worth considering. Only with a long-term view though.
