The rise of ChatGPT, OpenAI’s instrument that may assist reply questions, has been unprecedented over the previous 12 months. Even traders can use it to faucet into the intensive data financial institution in relation to choosing dividend shares. I made a decision to ask the bot for its two favorite earnings concepts and to elucidate the reasoning behind them. Right here’s what it generated for me.

A strong begin

The primary decide was Authorized & Normal (LSE:LGEN). Apparently, that is additionally my prime decide in the mean time as nicely from my very own research. I’m serious about investing within the close to future. So at the very least I’m partially aligned with AI!

The reasoning was primarily based partly on the robust monitor report of paying (and steadily rising) dividends. It targets a payout ratio of round 50-60% of working income, which is sustainable. In spite of everything, nobody desires to purchase a inventory just for it to chop the dividend the next 12 months as a result of being stretched with money movement.

One other issue is the enterprise mannequin and who Authorized & Normal targets. The corporate earns throughout a number of channels, together with life insurance coverage, pensions, and asset administration. Due to this fact, it’s diversified and so even when one space of the enterprise slows, different areas may also help prop up total funds.

As populations age, demand for retirement options is rising, notably within the UK and US. Nevertheless, one threat is the tight regulation on the corporate. Naturally, corporations chargeable for investments ought to be regulated. However Authorized & Normal is barely on the mercy of any modifications going ahead.

Issues in regards to the subsequent decide

The second thought it steered was British American Tobacco (LSE:BATS). I disagree with this decide, however perceive why the ‘objective’ bot would have picked it.

Over the past 12 months, the inventory’s up 37%. This contrasts to the two% fall in Authorized & Normal shares over the identical interval. ChatGPT mentioned it likes the corporate as a result of it being a money movement machine. Regardless of declining smoking charges, BAT generates sturdy free money movement (over £9bn yearly) comfortably overlaying the dividend. And the continued dedication from the administration group to help dividend progress is one other plus.

But from my perspective, the autumn in demand for conventional tobacco merchandise is a giant concern. Despite the fact that New Class merchandise are attempting to make up the shortfall, I’m not satisfied that is the expansion sector the place I need to be allocating my cash.

I’m not saying I see the dividend in any speedy menace, however I simply really feel that I need to put my cash to work in different sectors that provide a much less cloudy outlook.

I do assume ChatGPT made some good factors, particularly relating to the revenue and money movement particulars of each firms. Nevertheless, there’ll all the time be a necessity for human inventory choosing to rationalise the knowledge and make the ultimate selections!