Buying FTSE 100 dividend shares can be a great way to generate a reliable passive income. The index has some of the highest yields on offer anywhere, with plenty of reliable payers.
As a keen income investor, I wondered whether ChatGPT could help me pick dividend shares to consider buying. As a simple test, I asked the AI to recommend the best FTSE 100 dividend stock to buy today.
10 shares it suggested
Overall, the response was probably a bit better than I expected. First of all, ChatGPT avoided the obvious trap of suggesting just one stock. A diversified portfolio always makes more sense for income.
Instead, AI provided me with a list of 10 shares. They certainly aren’t original suggestions, but I think they’re sensible enough.
Here’s the full list. I’ve also included the 2025 forecast dividend yield for each stock:
- Shell (4.7%)
- HSBC (6.7%)
- Unilever (3.6%)
- GSK (4.9%)
- Diageo (3.7%)
- National Grid (5.0%)
- Legal & General (LSE: LGEN) (9.8%)
- British American Tobacco (8.4%)
- AstraZeneca (2.5%)
- BT Group (5.7%)
This list includes most of the largest companies in the FTSE 100. I would guess that that if I owned just these 10, my portfolio would probably come close to tracking the index.
How reliable are these dividends?
With an average dividend yield of 5.5%, ChatGPT’s selection has the potential to generate a decent income.
However, dividends are never guaranteed and may be cut. For example, National Grid recently cut its payout (ChatGPT didn’t tell me that).
Indeed, over the last five years, Shell, GSK, HSBC and BT have also all cut their payouts for various reasons. They’re all paying out decent dividends now, but they aren’t the most reliable payers I could find on the UK market.
The stock I’d choose…
There are a few stocks on this list I think are worth considering. But my top choices today would probably be the two I already hold – Unilever and Legal & General.
Of these two, Legal & General would probably be my pick. The life insurance and investment giant is one of the biggest players in the UK market, with more than £1trn of assets under management.
Over the last decade, L&G has become a market leader in the bulk annuity business, taking over final salary pension schemes from large companies. This business has the potential to generate reliable cash flows for many years to come.
One possible risk is that newish CEO António Simões has only been in the role since 2023. The changes he’s made so far seem sensible to me, but this is a business where it takes a while for changes to deliver results.
It could be a few years before we know whether Simões has the right plans for long-term growth.
However, Legal & General has been in business for 188 years. It has a long record of profitable operations and has not cut its dividend since 2009. I believe the company’s long-term future is probably safe.
City analysts expect profits to bounce back in 2025. That puts Legal & General shares on a forecast price-to-earnings ratio of 9.5, with a 9.8% dividend yield.
I think the shares are worth considering as an income buy at this level.
This post was originally published on Motley Fool
