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Following ChatGPT blindly definitely isn’t recommended, especially when it comes to making investment decisions. However, it can be a useful tool when searching for shares to buy. With this in mind, I asked it for the three best high-yielding dividend stocks in the UK.
Sky-high income
The first name spewed out was life insurance and pensions specialist Phoenix Group (LSE: PHNX). And it’s not hard to see why.
Right now, the FTSE 100-listed company’s shares yield a monster 8.8% for 2025. By comparison, the yield of a fund that tracks the index as a whole is 3.4%.
Worryingly, the AI bot claimed the yield was 11.1%. But this doesn’t seem to have taken into account the nice move in the share price since April, due in part to the company surpassing analyst expectations on cash generation and adjusted operating profit in its 2024 results. As stated, it’s best to not take everything ChatGPT says as gospel.
Phoenix’s total dividend has been consistently hiked for a number of years now — always a great sign. Even so, growth has lagged inflation at around 2%-3%. The space in which it operates is also very competitive.
Still, I can think of worse picks to get the ball rolling.
Huge cash returns
Second on ChatGPT’s list was investment manager M&G (LSE: MNG). At 9.2%, its forecast dividend yield is even higher!
Like its top-tier peer, this eye-popping return is even more impressive considering the share price has only been going in the right direction in recent weeks.
It would seem the market likes all the cost-cutting going on here. A total of £230m is expected to be saved by the end of 2025. Today’s (30 May) news of a strategic partnership with Japanese life insurer Dai-Ichi Life — which will involve the latter taking a 15% stake in M&G — has also gone down well.
Notwithstanding this, M&G’s performance has been rather erratic since it demerged from Prudential six years ago. Any whiff of a prolonged downturn in markets could reduce the fees it receives. The ongoing shift by many retail investors into low-cost passive funds may also hinder revenue growth and the sustainability of dividends. The bot was quiet on these very real risks.
Dividend hero
Rounding of our trio was British American Tobacco (LSE: BATS). As ChatGPT highlighted, it boasts an enviable record of consistently raising its annual dividend. This surely makes it a great option for “a reliable income stream“, right?
Well, experienced Fools will know that those payments weren’t (and never can be) guaranteed. Spreading money around remains prudent, especially as tobacco sales have been steadily declining in many countries.
For its part, the firm has been transitioning to reduced-risk products to support earnings and protect those coveted cash handouts (the yield sits at 7.4%). The fact that revenue from Smokeless items represented 17.5% of total revenue in 2024 shows there’s a lot of room left to grow. Unlike the other stocks mentioned, the £73bn cap only has to scrap it out with a few other heavy-hitters too.
Again, I don’t think ChatGPT has dropped a clanger here. But the persistent threat of (more) regulation — which wasn’t highlighted — means suggests income investors should only be using the bot’s recommendation as a springboard for further research.