Image source: Getty Images
I asked ChatGPT for the perfect passive income portfolio — and here’s what it sent me. The model blended UK dividend shares, income-focused ETFs, REITs, infrastructure funds, and bonds to deliver a balanced yield of around 4.5%.
The equity core included Legal & General, yielding about 8%, and National Grid, offering around 5.5%. British American Tobacco added a hefty 9% yield, while Vodafone provided about 7%, albeit with more volatility.
Unilever was included for “stability and dividend reliability”, paying roughly 3.5%. To diversify globally, the Vanguard FTSE All-World High Dividend ETF rounded out the equity exposure with a 4% yield.
On the property and infrastructure side, HICL Infrastructure and The Renewables Infrastructure Group both targeted around 6%. Meanwhile Supermarket Income REIT and Tritax Big Box generated 5%-6% through long leases with inflation-linked rent.
For fixed income, the Vanguard UK Investment Grade Bond ETF, iShares 0–5 Year Corporate Bond (IS15) and iShares UK Gilts ETF delivered 4%–5% yields with “lower volatility”. Finally, the Royal London Short Term Money Market Fund, offering 4%-5% for “liquidity and stability”.
What do I think? Well, there’s a lot to comment on. However, overall I’d suggest it’s quite a lot of investments to hold to essentially receive only 0.4% more than the yield on three and six months Gilts (UK government bonds) I bought last week.
Is there a better alternative?
ChatGPT has tried to demonstrate the importance of diversification through a wide range of investments. That’s great, but it’s worth noting that vehicles like ‘all-world’ ETFs are incredibly diversified anyway.
An investor seeking a hands-off approach might allocate part of their portfolio to broad, all-world investments and government debt, while taking a more conviction-driven approach with the remainder — holding a smaller number of carefully chosen positions.
Personally, I don’t invest for dividends. I invest for growth with the aim of taking a passive income at a later date. However, there are several investments I’m considering or own already that have strong passive income credentials.
One to consider
I’m yet to add Fresh Del Monte (NYSE:FDP) to my portfolio, but it’s high up my watchlist.
Fresh Del Monte is a vertically integrated global agribusiness that grows, ships, and sells fresh and prepared fruit and vegetables under the Del Monte and MANN brands.
Its operations span farming, processing, logistics, and distribution — giving it strong control over quality and supply.
The shares trade at around 12.5 times forward earnings, with analysts forecasting 20.5% earnings growth this year and a further 9% in the following year.
The 3.4% trailing dividend yield is also appealing, particularly as payouts have grown meaningfully in recent years and are set to rise further.
I also like that the company also owns tens of thousands of acres of farmland, an asset base that provides long-term security and inflation protection in an era of dwindling arable land.
However, exposure to weather events and commodity-price swings can affect profitability. Even so, with solid fundamentals and tangible assets, Fresh Del Monte looks well worth considering.
