Put some money into dividend stocks and then watch your second income grow over time.

As an idea it seems elementary enough. However, translating ideas into practice is not always basic.

What about this?

Big companies make money – and it’s up for grabs

To start, it might be helpful to explain why I (like millions of other investors) find dividend stocks an attractive option when it comes to passive income.

There are hundreds of companies on the London Stock Exchange with proven business models that generate free cash and pay at least some of it to shareholders in the form of dividends. These shareholders don’t have to do anything with the money other than own the share in question.

Some of these companies are miniature, but many are giants of British business, such as: Shell, Tesco, AND Unilever.

Some people rack their brains trying to come up with creative ways to earn a second income. But the road is already there, hidden in plain sight.

Setting expectations

How profitable can this be?

It depends on how much one invests and at what average dividend rate.

Yield is basically the amount of dividends someone expects to earn in a year, expressed as a percentage of the stock price. So electricity FTSE100 a yield of 3% means that someone who spends £100 on FTSE 100 shares today will hopefully be earning £3 a year as a second income from those shares.

In other words, someone who spends £100,000 will be hoping to get a second income of £3,000 a year.

I say “let’s hope” because dividends are never guaranteed. This is one of the reasons why a wise investor diversifies his portfolio and pays special attention when choosing which stocks to buy.

While the average for the FTSE 100 is 3%, I think in today’s market an investor could realistically expect a return of 6% by sticking to proven blue chip companies.

Hundreds of pounds in weekly income

At this level, how much does it take to earn an average of £300 a week as a second income?

That’s £15,600 a year. So at a rate of return of 6% it would require £260,000.

The good news is that for someone who hasn’t invested that amount (not even a penny) today, it is possible.

This can result in an raise in second income along the way to your goal. Or an investor could reinvest dividends initially trying to reach the target portfolio size as quickly as possible.

Doing this on £1,000 a month, a portfolio compounded at 6% per annum should reach £260,000 in less than 15 years.

Income share to consider

One dividend stock that I think deserves investors’ attention is the company British-American tobacco (LSE: BATS).

Many people don’t like cigarettes. This explains why some investors avoid FTSE 100 shares for ethical reasons.

It also highlights a key risk from a business perspective: degenerating cigarette sales. British incomes have been falling for several years in a row.

Pricing power through a portfolio of premium brands can aid mitigate this risk. However, this is a risk that could ultimately threaten the company’s long track record of growing annual dividends per share.

Although cigarette sales are degenerating, they remain significant and highly profitable. British American Tobacco offers a dividend yield of 4.9%.

Is it worth investing £5,000 in British American Tobacco Plc now?

If investing expert Mark Rogers and his team have stock advice, it can pay to listen. After all, Twelfth Magpie’s flagship Share Advisor newsletter, which it has run for almost a decade, provides thousands of paying members with the best share recommendations from across the UK and US markets.

Mark believes there are 6 standout stocks that investors should consider buying right now. Want to see if British American Tobacco Plc is on the list?

Christopher Ruane has no position in any of the stocks mentioned.