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We already appear to depend on AI for an entire 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 standard 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 of 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 remaining.
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 in the present day. 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 sturdy free money move and has among the lowest price initiatives on this planet. The steadiness sheet carries solely a comparatively small quantity of debt too.
Contemplating how a lot copper, iron ore, and different metals will probably 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 considerations.
Rio’s whole dividend has been falling in recent times (regardless of nonetheless boasting an above-average yield). This goes some strategy to underlining the truth that something associated to commodities will be relatively risky. Not solely does it not have any management over the worth of what it digs up, the very strategy of doing so is usually harmful and troublesome.
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 akin to this might see a giant drop in revenue if one or two encounter issues.
Eagle-eyed Fools may even spot that at the very least 4 of the seven — Authorized & Normal, Phoenix Group, M&G and HSBC — come from the Financials sector. If the UK and/or world economic system goes via a sticky (or stickier) patch, all might endure. And which may imply much less passive revenue being dished out.
Curiously, ChatGPT mentioned that its recommendations have been diversified. I urge to vary.
Don’t depend on the bot
Finally, I’m not comfy taking the simple possibility with my hard-earned money. Sure, I would think about a few of these names the AI bot churned out, primarily based on their historical past of distributing money for shareholders up to now. 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.
Understanding that the UK market is a dividend hunters dream, I believe there are an entire host of different shares to ponder shopping for if producing revenue is the identify of my sport.
