I asked ChatGPT to name 3 brilliant passive income stocks for an ISA in 2026 and it said…
I’m looking to invest around £3,000 in a Stocks and Shares ISA. With retirement roughly a decade, away, I’m looking to build a passive income on top of what I’ll get from the State Pension and Self-Invested Personal Pension.
So I decided to call in ChatGPT. I’d never allow artificial intelligence (AI) to pick stocks, because it struggles with facts and doesn’t have opinions of its own. But it can throw up a few ideas.
I was hoping for some surprise picks or insights, but it started by naming the two most obvious FTSE 100 income stocks I could imagine.
Legal & General Group
The first one is so obvious, I hold it myself, asset manager and insurer Legal & General Group (LSE: LGEN), which doesn’t coincidentally have the highest trailing yield on the blue-chip index, at 8.2%.
ChatGPT said it offers financial sector exposure with strong income potential, adding: âIt benefits from recurring cash flows and its payout is generally well-covered by earningsâ.
Iâm unconvinced. Ideally, shareholder payouts should be covered twice by earnings. Legal & General’s dividend cover is just 0.94. That’s my biggest worry about this stock, yet ChatGPT showcased it as a key benefit. Worrying.
My second concern is that the Legal & General share price has underperformed, due to three years of volatile earnings. Although this might be an opportunity, giving its scope to play catch-up with sector rivals.
Either way, I think the shares are worth considering, for long-term income seekers. Legal & General has a strong balance sheet, and I believe the dividend should hold. No guarantees though.
British American Tobacco
The next tip was equally predictable, but maybe that’s not a bad thing. ChatGPT named British American Tobacco (LSE: BATS), calling it a globally-recognised tobacco business with a long history of generous dividends. It also noted that âyields have trended well above the FTSE 100 average thanks to consistent cash generation from established brandsâ.
The British American Tobacco share price is up 36% in a year, the dividend yield’s a thumping 6%, but the price-to-earnings ratio remains a modest 11. The FTSE 100 average is around 20.
AI doesn’t mention any risks so I’ll point out that cigarette makers are under constant regulatory scrutiny, and after a strong recent run, the shares may slow. But it may be worth considering with a long-term view, for those happy to invest in cigarette makers.
OSB Group
I asked ChatGPT to name one stock from the FTSE 250 and it picked OSB Group (LSE: OSB), which offers specialist mortgage and savings products. That surprised me, because it already tipped a stock from the financial services sector. I’m unsure this is the diversification I called for.
Like the big FTSE 100 banks, the OSB share price has had a blinder, soaring 75% in 12 months. Yet it’s still cheap with a price-to-earnings ratio of 7.7, while the trailing dividend yield’s a nifty 5.3%.
Its lending has been growing nicely and while falling base rates could squeeze net interest margins, they could also boost mortgage lending and reduce impairments. OSB has even been running a share buyback programme. This one merits further investigation.
ChatGPT has its uses but as my results show, it must be approached with caution. Investors must make their own decisions rather than rely on a robot.
The post I asked ChatGPT to name 3 brilliant passive income stocks for an ISA in 2026 and it said⦠appeared first on The Motley Fool UK.
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Harvey Jones has positions in Legal & General Group Plc. The Motley Fool UK has recommended British American Tobacco P.l.c. 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.
