One way to earn passive income is to fill your ISA with dividend stocks.

To demonstrate how this could work in practice, I’ll explain how you can achieve an average weekly passive income of £250. This gives the amount of PLN 13,000. pounds per year.

ISA configuration

The first step, of course, is to have an ISA!

There are many different options when it comes to choosing one. Some people like a higher level of service than others, and every investor is different.

In any case, one of the things I always consider is how much it will cost me. The costs will affect the size of my ISA and therefore its dividend generating potential.

This may come in the form of setup costs. However, there are many other potential fees and commissions: administrative costs, transaction fees, annual fees and more. What seems like a diminutive percentage can add up to a huge sum of money in the long run.

That’s why choosing the right Stocks and Shares ISA is essential.

The mechanics of passive income

With an annual goal of 13 thousand pounds a dividend yield of 10% would require an ISA of £130,000. pounds. An income of 5% would require an ISA of £260,000. pounds.

Although 10% seems like a very aggressive target to me at the time FTSE100 works out to about a third of that amount, I think about 7% is a realistic target in today’s market, even when sticking with blue chip stocks.

This would require an ISA of around £186,000. pounds.

It could be a lump sum, but the investor could also deposit PLN 20,000. pounds per year into your ISA and achieve this target within 8 years, compounding at an interest rate of 7% per annum.

A smaller regular contribution would also work, although it would take longer to reach your target ISA size.

One dividend stock to consider

One stock I think investors should consider for their ISA is the paper and packaging group Worlds (LSE: MNDI).

The last few years have been uneven in the packaging industry, with fluctuations in demand impacting prices. This was reflected in Mondi’s share price, which has fallen by more than half over the last five years.

The dividend yield is a function of the dividend per share and the share price. Therefore, the falling price of Mondi shares increased its profitability to 7.5%.

Of course, there is never a guarantee that dividends will be sustainable, and that applies to Mondi as it does to any other company. I see a risk that continued cushioned pricing in some parts of the packaging market will continue to negatively impact profitability.

However, I expect that in the long term, demand for packaging will remain high, even if it fluctuates.

Barriers to entry into the industry are quite high, given the costs and complexity of building huge factories and matching them to appropriate supply chains and end markets. Mondi’s significant global footprint provides economies of scale.