I asked ChaGPT to name a top UK dividend stock for my 2025 ISA – and was thrilled!

I’m looking to take advantage of the FTSE 100 dip to buy a dividend stock or two for this year’s Stocks and Shares ISA. I’ve done a lot of research but fancied a second opinion. So I called in artificial intelligence.

Like a lot of people, I like to play around with ChatGPT, but never take its conclusion seriously. As the chatbot itself confesses, it makes mistakes.

It also admits it’s not a stock-tipping service. Since I would never rely on a robot, that’s fine by me. Ultimately, I use my own judgement.

It gave me three FTSE 100 shares

I told my robot buddy I was looking for a stock yielding at least 4%, with a track record of increasing shareholder payouts. Ideally, I wanted something trading at a reasonable valuation. A spot of potential share price growth would be nice too. ChatGPT said: “No problem!”

Then it picked FTSE 100 insurer Legal & General Group, which was a problem, because I both own it and have written about it a lot lately.

I asked again and got Taylor Wimpey, which I also own and have written about a lot. So I asked ChatGPT to give it a third shot and this time it suggested insurer Phoenix Group Holdings (LSE: PHNX). Which I also own! I was thrilled to see AI and I are on the same page when it comes to dividend shares. That has to be a good thing, right? Maybe, although it’s clear the AI is just aggregating the views of real humans who write about stocks.

Still, I haven’t actually written about Phoenix lately, so here goes.

Inevitably, ChatGPT immediately zoned in on its stunning 10.2% yield, the highest on the FTSE 100. It also highlighted its “strong track record of progressive dividend increases and plans to continue delivering sustainable payouts”.

It added: “In its full-year 2023 results, Phoenix announced a 3% increase in its annual dividend, in line with its commitment to steady, inflation-beating income for shareholders.”

Phoenix publishes 2024 results on 17 March, so we’ll know on Monday whether it’s still sticking to that commitment.

Double-digit yields are famously fragile. While the board remains committed to shareholder payouts, I wouldn’t be surprised to see it freeze or cut the dividend unless conditions improve.

Will the share price ever grow?

Continued stock market volatility will hammer the value of the massive £290bn of assets Phoenix manages. But as ChatGPT points out, it has a trick up its sleeve. It specialises in managing closed-book life insurance and pension funds, which “means it generates steady, predictable cash flows, even in uncertain economic conditions.”

My chatbot chum also highlighted a reasonable price-to-earnings ratio of around nine. That seemed low to me. On checking, I get 15.5 times. Like ChatGPT says, it can make mistakes.

I was wary when I bought Phoenix last year. The stock has fallen 10% in the last six months, although it’s flat over one year.

I think Phoenix is worth considering for income seekers, but despite owning the stock, I’m not expecting much share price growth in the next few years.

I will look elsewhere for my ISA dividend stock purchase. Maybe one with a lower yield, and higher growth prospects. And this time I’ll do my own research.

The post I asked ChaGPT to name a top UK dividend stock for my 2025 ISA – and was thrilled! appeared first on The Motley Fool UK.

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Harvey Jones has positions in Legal & General Group Plc, Phoenix Group Plc, and Taylor Wimpey Plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.