I asked ChatGPT to pick the best stock for my income. Here is the result!

The increase in use of ChatGPT over the past year has been huge. Although investors should be cautious about basing any decisions on artificial intelligence (AI), I thought it would be interesting to see which income stock we would choose to consider buying now. The result may surprise some.

Stock pick

ChatGPT notified me first with a disclaimer, noting that dividend yields are subject to change. He told me to do thorough research or consult a financial advisor before making any investment decisions. So far, so good.

It then explained the purchase case British American cigars (LSE:BATS). I FTSE 100 the stock is up 25% over the past year, with a yield of 7.95%. As such, it is one of the most profitable options in the entire index.

The good yield has been one of the main reasons why the chatbot has suggested that it can be a good share of income. In addition, it noted that the company operates in an environment that generates strong cash flow. It is also considered a defensive stock.

Cash flow should make dividends easy to pay. Due to the defensive nature of the stock, it can help lower the share price during a market crash. Constant demand for products can help the dividend to be maintained even in difficult times.

The other side of the coin

Surprisingly, it didn’t present any material hazards, just to say the least “regulatory risks in the tobacco sector are a factor to be weighed”.

I’m a little surprised it didn’t increase the risk associated with the company. In my opinion the risks are the main reason why I would say that British American Tobacco is the best share for money to buy right now.

The December trading review noted that performance throughout the year was driven by the establishment of New Categories. This includes vapes and other electronic cigarettes. It is trying to move away from traditional tobacco sales, as there is a worldwide push from governments to stop smoking.

However, this trend of declining demand for cigarettes has been steady for several years, hindering the growth of corporate income. For example, 2024 estimated revenue of £26.28bn. in 2019 it is £25.88bn. So the company hasn’t really grown in the last five years.

Human wisdom

While some wouldn’t see this as a big risk, I think it’s a big enough concern not to give it the title of best income stock. I would like to pick a company with a slightly lower yield that is growing revenue and profit, in a sector that is growing in size. This provides a sustainable source of income going forward, in my opinion.

ChatGPT continues with more objective information, so I understand why it chose this stock. But when I add in my specific view of the field, it makes me stop and think. It shows that even with the best AI in the world, human demand will remain in the investment process for a while yet!