On the surface, income sharing is obvious. Park some extra cash in a company with these types of shares and get a percentage of your money two to four times a year. Anyone looking to build an income stream, even just a few hundred pounds, may wonder why they should look elsewhere.

We can even calculate in advance how much our income stream will cost us. Of course, this is not an exact science. Dividends vary from year to year, sometimes due to company performance and sometimes due to broader factors that have nothing to do with the company itself. But as long as we’ve been investing long enough for the ups and downs to be smoothed out, the estimates aren’t too complex to come up with.

Theoretically

Let’s start with a monthly income stream of £300. We hope that within a year this will amount to £3,600 and our shares of the income will pay us dividends. To achieve this from some of the largest payers on FTSE 100 may require an initial outlay of £45,000 at a dividend yield of 8%. That’s a lot more than you’d get from a savings or buy-to-let account, and we can get all the money tax-free if we exploit a stocks and shares ISA wisely.

Before we go any further, remember that theory is very different from practice. In this case, very few companies pay out such a high rate of return, and those that do usually don’t offer much in the way of share price appreciation. Perhaps they belong to the withering sector. Perhaps a huge debt pile has a substantial impact on valuation. Whatever the problem, it’s critical to research your high-paying stocks before you get into trouble.

There is one such magazine British-American tobacco (LSE: BATS). I doubt many people expected the creator Dunhill AND Lucky Strike be a fast-growing company, but the problems are perhaps even more sedate when we look under the hood.

Will it grow?

The latest boost is due to the boost in prices of cigarette packs offered by the company, and there is not much room for this anymore. Taxes on them are also exorbitantly high and no one will complain loudly if they continue to rise.

Consumption in key markets has been withering for decades, and the potential antidote to the problem, non-flammable products such as vaporizers, account for only a miniature portion of sales. The legislative threat also appears in the case of these products.

On the plus side, the British pay a robust dividend that continues to grow. The yield is currently 8.71%, slightly above our hypothetical value above, and is well covered by the company’s earnings, meaning there is little risk to upcoming payouts.

Future profits will also be supported by global cigarette consumption, which is expected to grow until 2030, mainly due to “status symbol” effect in middle-income countries.

For anyone looking to invest in income stocks to earn £300 a month or otherwise, I think this is a stock worth considering.