One way to build long-term wealth is to invest through a Stocks and Shares ISA. ISAs are also one of the ways I aim to earn passive income in the form of dividends paid by the companies I invest in.

This allows me to benefit from the commercial success of vast blue-chip companies with proven business models.

If I had £10,000 to spare today and wanted to utilize it to earn £900 a year in dividends, here’s the plan I’d put into action.

Setting up an ISA

My first move would be to choose the Stocks and Shares ISA which seemed best to me. There are many options, so I will take some time to make a choice.

I then put my £10,000 into it so it would be ready to invest as soon as I found shares to buy.

How to find stocks to buy

Finding stocks that seemed right for my ISA could have made the difference in whether I achieved my passive income target.

But I wouldn’t start with income. No dividend is ever guaranteed, so just because a stock is paying a handsome dividend today doesn’t mean it will continue to do so in the future.

What am I looking for then?

Instead of focusing on what the company is paying now, I focus on how it manages to pay it. Has it established itself successfully in an industry with high customer demand and seems likely to be sustainable? Does it have a business model that means sales lead to profits rather than losses? What does the company’s balance sheet look like – is it burdened with debt or excess cash?

One income stock with a long history of dividend increases

Take my arrest for example British American tobacco (LSE: BATS).

As the name suggests, the company operates in the tobacco industry. It produces and sells cigarettes in many markets around the world. Thanks to having premium brands such as Flukecan charge a higher price for its products.

This is helpful in countering the long-term decline in volume that is expected to accompany reduced cigarette smoking rates in many markets. I see this as a risk to British sales and profits. But I think he can continue to do well. Cigarette sales are failing but remain significant. Meanwhile, the company is expanding its non-cigarette portfolio to include areas such as vaporization.

It has raised its dividend every year for decades (making it a dividend aristocrat) and currently has a yield of 9.9%.

Building a diversified portfolio of dividend stocks

However, no matter how good one share may seem, I always make sure my ISA is diversified across several different companies. With £10,000, I could comfortably spread my money across five to ten shares.

To hit my target of £900 a year from the start, I would need to achieve an average dividend yield of 9%.

Although this is possible given the high yields of some of them FTSE100 stocks right now, a lower yield could also facilitate me. Given my long-term approach to investing, I would simply reinvest the dividends until I reached my target dividend income (something called compounding). For example, with an average yield of 7%, it would take just four years.