I asked ChatGPT for the 3 best FTSE stocks for retirement income, and here’s what it said…
Much has been written about the ability of various artificial intelligence (AI) âthingsâ (a technical term, I think) to pick FTSE stocks.
I have avoided such interactions, with dark memories of the HAL computer in 2001: A Space Odyssey still looming large.
Nevertheless, in the broader interests of mankind, I asked the ChatGPT beast for its best three FTSE stocks to generate retirement income.
So, what was its answer?
Top of the list
The number one pick was Phoenix Group Holdings (LSE: PHNX), with HAL â sorry, ChatGPT — underlining its âvery generous yieldâ.
Indeed, the stockâs current 8.1% dividend yield compares favourably to the FTSE 100âs 3.1% and the FTSE 250âs 3.5%.
The AI also cited Phoenixâs improving cash generation and capital strength as major positives.
It was not short on citing earnings risks either. These were given as âchanges in regulation, interest rates, inflation that can impact profitability and capital requirementsâ. I agree.
However, it did not mention analystsâ forecasts that its earnings will soar 106% a year to end-2027. And it is growth here that powers dividends higher over time.
However, I have written about Phoenix Group many times. So perhaps the chatbot was subtly feeding this back to me to get on my good side. To what end? Perhaps we will never know.
Houston, we have a problem
I suspect it may have done the same for British American Tobacco (LSE: BATS) â its second pick.
Interestingly, though, it does not appear to factor in the latest share price news into its dividend yield reckoning, as its human counterparts would.
The tobacco and nicotine substitute products manufacturer paid a 235.52p dividend in 2024. However, given a major rise in its share price this year, the yield has dropped to just 5.8%. This is because a shareâs dividend yield moves in the opposite direction to its price.
This is below my 7%+ dividend yield requirement for my retirement income stocks. It reflects the extra risk in investing in shares over taking no risk at all. And the current ârisk-free rateâ (the 10-year Gilt yield) is 4.6%.
Nonetheless, ChatGPTâs view that its key earnings risks are regulatory tightening and changing consumer habits looks well-founded to me.
Computer saysâ¦
Last on the AIâs list was electricity and gas transmission giant National Grid.
ChatGPTâs rationale for the strangest of its three picks is that it has ârelatively stable demand and regulated frameworksâ.
I think I may have veered into HALâs online dating profile here. It certainly does not specifically address how its dividend yield will look in the coming years.
In fact, it looks uninspiring at 4% and projected to stay around that level until 2028 at minimum.
It also skirts around the £60bn in government-mandated investment in power infrastructure required from 2024/25 to 2028/29. Instead, ChatGPT vaguely highlights âlarge capital expenditureâ in this bracket.
Iâm sorry, ChatGPT, Iâm afraid I canât do that
ChatGPT produced some food for thought in its suggestions, but they are only that.
They do not reflect a broad understanding of markets or investment that humans can attain.
Crucially as well, ChatGPT lacks the razor-edged focus that having oneâs own money at risk brings with it.
So, I will not be pursuing ChatGPTâs suggestions. Rather, I am looking at several top-flight, ultra-high-yielding FTSE shares.
The post I asked ChatGPT for the 3 best FTSE stocks for retirement income, and hereâs what it said⦠appeared first on The Motley Fool UK.
Should you invest £1,000 in Phoenix Group Holdings plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Phoenix Group Holdings plc made the list?
More reading
- How large should your Stocks & Shares ISA be for a £1k monthly passive income?
- I asked ChatGPT to build a 7%-yielding passive income ISA from FTSE 100 dividend shares and it saidâ¦
- I asked ChatGPT for the best stocks to buy for a second income. It said…
- How much do you need in a Stocks and Shares ISA to aim for a £1,000 a month income?
- How much do you need in an ISA to aim for a monthly passive income of over £3,000?
Simon Watkins has positions in British American Tobacco P.l.c. and Phoenix Group Plc. The Motley Fool UK has recommended British American Tobacco P.l.c. and National Grid Plc. 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.
