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We already appear to depend on AI for a complete host of issues. However can it choose an ideal portfolio of FTSE 100 shares that dish out passive revenue?
For a little bit of enjoyable (and no extra), I made a decision to check this out with ChatGPT.
The same old suspects
Having entered my question, the AI bot trotted out a solution that includes seven of the UK’s largest shares paying revenue. I’ll say a bit extra about that quantity in a bit.
The primary six suggestions learn like a who’s who of trusted UK-listed dividend heavyweights:
The ultimate inventory finishing the set arguably stands out from the remainder.
Reliable revenue
Rio Tinto (LSE: RIO) is among the world’s largest diversified miners. It’s additionally boasted nice revenue credentials for a while.
Over time, Rio’s dividend yield has been far above the typical of the FTSE 100. Certainly, that’s the case at present. Proper now, the shares yield 5.2%. The index provides ‘simply’ 3.1%.
Naturally, we will’t depend on the previous to foretell the long run. However I’d be stunned if Rio stopped returning a excessive proportion of its revenue to shareholders. It constantly generates robust free money circulate and has a number of the lowest value initiatives on the planet. The steadiness sheet carries solely a comparatively small quantity of debt too.
Contemplating how a lot copper, iron ore, and different metals can be wanted for the inexperienced power revolution, I’m additionally bullish on the agency’s long-term prospects.
Purchaser beware
Even so, I’ve some issues.
Rio’s complete dividend has been falling in recent times (regardless of nonetheless boasting an above-average yield). This goes some option to underlining the truth that something associated to commodities may be reasonably unstable. Not solely does it not have any management over the worth of what it digs up, the very technique of doing so is usually harmful and tough.
However there are different, extra normal issues that make me uneasy.
For one, ChatGPT solely put ahead seven shares (I didn’t specify a quantity). Name me a cautious soul however I feel that’s too few. Whereas there’s no magic determine, a portfolio reminiscent of this might see an enormous drop in revenue if one or two encounter issues.
Eagle-eyed Fools may even spot that not less than 4 of the seven — Authorized & Common, Phoenix Group, M&G and HSBC — come from the Financials sector. If the UK and/or international economic system goes by way of a sticky (or stickier) patch, all might endure. And that may imply much less passive revenue being dished out.
Apparently, ChatGPT mentioned that its ideas have been diversified. I encourage to vary.
Don’t depend on the bot
In the end, I’m not comfy taking the simple possibility with my hard-earned money. Sure, I’d contemplate a few of these names the AI bot churned out, based mostly on their historical past of distributing money for shareholders previously. However I do know extra analysis into their future prospects is required.
Though I did specify solely top-tier shares in my immediate, this choice additionally felt a bit…lazy.
Figuring out that the UK market is a dividend hunters dream, I feel there are a complete host of different shares to ponder shopping for if producing revenue is the identify of my sport.
