I asked ChatGPT for the perfect passive income ISA and it said…
Some of the best performers in my Stock and Shares ISA this year have been those that pay passive income. These include BAE Systems, Aviva, HSBC, Games Workshop, Coca Cola HBC, and BlackRock World Mining Trust.
As I write, these UK stocks are up between 35% and 65% — before dividends!
Given this strong performance, I’m tempted to add a couple more income shares to my portfolio in 2026. So I turned to ChatGPT for its view on the ‘perfect’ passive income portfolio. Here’s what it said.
The 10-stock portfolio
The AI bot said it’s goal was to find diversified income streams and dividends that grow faster than inflation. It aimed to build a portfolio with a 5%-7% starting yield.
Here are the 10 dividend stocks it fired out:
| Type | |
| Legal & General | Insurer |
| Aviva | Insurer |
| M&G | Asset manager |
| Phoenix Group | Life and pensions |
| National Grid | Utility |
| Unilever | Staples |
| British American Tobacco | Tobacco |
| LondonMetric Property | REIT |
| 3i Infrastructure | Infrastructure |
| Foresight Solar Fund (LSE:FSFL) | Renewables |
Problems
At first glance, I think most of this portfolio looks very strong. However, some of these stocks are not expected to grow their dividends noticeably faster than inflation (currently around 3.2%), as ChatGPT seemed to suggest.
For example, Phoenix, Unilever, and Legal & General are only forecast to growth theirs by 2%-3% in 2026. This isn’t a reason not to consider buying these shares, of course. Legal & General and Phoenix both sport starting yields above 7.5%, and their share prices may rise. But income growth looks modest.
The bot also produced inaccuracies, saying British American Tobacco yields around 9% when it’s actually 5.7%. And it asserted that 3i Infrastructure’s is 5% when the real figure is closer to 3.5%.
A risky pick
The worst inaccuracy relates to the FTSE 250‘s Foresight Solar Fund. It owns solar farms and battery energy storage systems across the UK, Spain and Australia. ChatGPT puts the fund’s dividend yield at just 6%. In reality, it’s actually over 12% after a 48% share price collapse since mid-2022.
Somewhat bizarrely, ChatGPT seem to pat itself on the back by not naming any “12% traps“, where if the income “looks too good, it usually is“.
However, I think Foresight Solar Fund might indeed become a 12%-yield trap. In the third quarter, electricity production from its global portfolio was 6.3% below budget, despite irradiation being 3.6% above its base case (more sunlight than forecast, basically).
There were grid interruptions in the UK, while both Spain and Australia saw challenges. Meanwhile, the fundâs struggled to sell its Australian assets for what it thinks they’re worth. As such, itâs paused this process, leaving it unable to pay down some debt.
More worrying was this statement in November: “[T]he UK Department for Energy Security and Net Zero unveiled proposals to revise the inflation indexation of the Renewable Obligation (ROC) and Feed-in Tariff (FIT) schemes. These changes have the potential to impact future revenues for operating UK solar projects and dampen investor confidence in the country’s renewable energy sector“.
In future then, the UK might weaken the inflation protection built into legacy renewable subsidies. This could end up hitting cash flows, threatening dividend growth.
As things stand though, management said it was confident in achieving its dividend cover target for the year. So investors might want to consider the stock for its near-term, ultra-high-yield income potential.
For me though, the regulatory risk adds too much uncertainty, putting me off the stock. I see better dividend growth opportunities elsewhere.
The post I asked ChatGPT for the perfect passive income ISA and it said⦠appeared first on The Motley Fool UK.
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HSBC Holdings is an advertising partner of Motley Fool Money. Ben McPoland has positions in Aviva Plc, BAE Systems, BlackRock World Mining Trust Plc, Coca-Cola Hbc Ag, Games Workshop Group Plc, HSBC Holdings, and Legal & General Group Plc. The Motley Fool UK has recommended BAE Systems, British American Tobacco P.l.c., Foresight Solar Fund, Games Workshop Group Plc, HSBC Holdings, LondonMetric Property Plc, M&g Plc, National Grid Plc, and Unilever. 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.
