Do you have free money, but you have no idea how to exploit it? Parking it in your Stocks and Shares ISA this week before the annual deposit deadline will allow you to exploit it later at your discretion. One option would be to try to build passive income streams by using an ISA to buy dividend stocks.

It is possible, but there are some potential pitfalls that should be avoided. Here are three things that can support you build stronger passive income streams from your ISA

1. Choose the best ISA

This may seem obvious, but a good place to start is to get the most out of your ISA provider while keeping costs to a minimum.

The fees, commissions and charges may seem diminutive. But 0.3% here and 0.5% there, a flat commission of £50 here or a minimum of £15 there can soon start to add up. This can translate into profits in the long run.

That’s why I think it’s worth shopping around when choosing the right Stocks and Shares ISA.

2. Focus on the quality of the dividend, not just its current yield

I like a high rate of return as much as the next investor. When investing, I look at the profitability of stocks.

But, critically, I don’t look Just at the same time.

I take many other factors into account to support me judge what the dividend will be quality Is.

For example, how well is it covered by free cash flow? How does a company’s management prioritize dividend payments over other capital allocation options? What could the balance sheet mean for future free cash flow? How sustainable is the company’s cash flow?

These are all subjective assessments to some extent. However, I still think they are vital when considering how long a dividend might last and what might happen to it in the future.

3. Let the dividends earn dividends

Another way to boost your passive income streams over time is to reinvest them instead of withdrawing them as cash.

This way the dividends themselves can start paying dividends.

This is called folding. This is a basic yet powerful tool when it comes to increasing your passive income streams.

One income share to consider

Let’s go back to what I said above about the company’s ability to maintain its dividend.

British-American tobacco (LSE:BATS) has a hefty pile of debt. The target market for cigarette smokers is shrinking and sales continue to be threatened by regulatory burdens.

This makes it sound like it might be complex for FTSE100 owner of brands including Pall Shopping Center maintain the dividend over the long term, let alone boost it annually as has been the case for decades.

However, the company has a lot of pricing power thanks to the addictive effects of nicotine and its portfolio of premium brands.

Demand for cigarettes has been falling in many markets for years, yet the company continues to generate huge revenues. It is also developing activities unrelated to cigarettes.

Not everyone wants to cooperate with tobacco companies due to the ethical issues involved. However, I think those who do this deserve British American Tobacco’s attention for their passive income potential.