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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 earnings?
For a little bit of enjoyable (and no extra), I made a decision to check this out with ChatGPT.
The standard suspects
Having entered my question, the AI bot trotted out a solution that includes seven of the UK’s largest shares paying earnings. I’ll say slightly 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 proud from the remainder.
Reliable earnings
Rio Tinto (LSE: RIO) is among the world’s largest diversified miners. It’s additionally boasted nice earnings credentials for a while.
Through the years, Rio’s dividend yield has been far above the typical of the FTSE 100. Certainly, that’s the case right this moment. Proper now, the shares yield 5.2%. The index gives ‘just’ 3.1%.
Naturally, we will’t depend on the previous to foretell the long run. However I’d be shocked if Rio stopped returning a excessive share of its revenue to shareholders. It persistently generates robust free money circulate and has among the lowest price initiatives on the earth. The steadiness sheet carries solely a comparatively small quantity of debt too.
Contemplating how a lot copper, iron ore, and different metals shall be wanted for the inexperienced vitality revolution, I’m additionally bullish on the agency’s long-term prospects.
Purchaser beware
Even so, I’ve some considerations.
Rio’s whole dividend has been falling lately (regardless of nonetheless boasting an above-average yield). This goes some strategy to underlining the truth that something associated to commodities may be quite 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 believe that’s too few. Whereas there’s no magic determine, a portfolio corresponding to this might see a giant drop in earnings if one or two encounter issues.
Eagle-eyed Fools can even spot that no less than 4 of the seven — Authorized & Basic, Phoenix Group, M&G and HSBC — come from the Financials sector. If the UK and/or world financial system goes via a sticky (or stickier) patch, all may undergo. And which may imply much less passive earnings being dished out.
Curiously, ChatGPT mentioned that its ideas had been diversified. I encourage to vary.
Don’t depend on the bot
Finally, I’m not snug taking the straightforward possibility with my hard-earned money. Sure, I would contemplate a few of these names the AI bot churned out, primarily based 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.
Realizing that the UK market is a dividend hunters dream, I believe there are a complete host of different shares to ponder shopping for if producing earnings is the identify of my recreation.
