Have you ever thought about filling your Stocks and Shares ISA with dividend stocks as a way to earn passive income?

Many people do this.

This approach may be profitable in the long run.

This also means that you can hopefully earn passive income from proven blue chip companies. This seems really passive to me compared to some of the other approaches people apply.

Setting a goal and working towards it

How much can such a plan earn?

It’s a bit like asking how long a piece of string is. The amount of passive income a Stocks and Shares ISA can generate in the form of dividends depends on three factors: the amount of investment, for how long and at what dividend rate.

1 thousand pounds per month equals 12 thousand. pounds per year. At a rate of return of 5%, this would require an investment of PLN 240,000. pounds. With a yield of 7%, it would require slightly less than PLN 172,000. pounds.

This may give the impression that higher profits are the most significant thing. However, there is no guarantee that a dividend will be sustainable, so when looking for a stock to buy it’s always significant to look at the odds source any future dividends, not just the current rate of return.

1 thousand pounds per month is a realistic goal, as is this one

Both 5% and 7% are above current FTSE100 give. However, I think 7% is a realistic target in today’s market.

Not everyone has a spare 172,000. pounds in a stocks and shares ISA which would allow them to get started straight away. That’s good – you can also start from scratch by making regular contributions.

By putting £20,000 a year into an ISA and increasing the interest rate at 7% a year, it would take just 7 years to reach your target amount of close to £172,000.

This can also be done with smaller cartridges, although it will then take longer.

Finding stocks to buy

One stock I think investors should consider is Legal and general information (LSE: LGEN). The FTSE 100 listed financial services company has a dividend yield of 8.9%.

It also intends to boost its dividend per share every year. The sale of a vast US business should aid with this, generating cash, although I see a risk that it could also leave a gap in the company’s ability to generate profits compared to the previous situation.

However, given its mighty brand, long history, vast customer base and proven ability to generate cash, I think there’s a lot to like about Legal & General.

Hopefully, in the long run, it will be able to leverage these strengths to generate more cash than it needs to run its business, and hopefully pay out a vast portion of it in the form of dividends.

Getting started

Choosing a diverse mix of high-quality stocks is one step on this path to passive income. But before doing so, one needs practical measures. It is therefore significant to choose the right Stocks and Shares ISA to suit their personal needs.

They can then start scanning the market for dividend stocks with great long-term potential.