More than two months have passed since the current Stocks and Shares ISA. Even though the investment limit is £20,000 per year, it’s still a great tool that can be used to generate significant passive income over time. Looking at the numbers, here’s how someone can achieve £740 a month.

Step by step

One of the advantages of using an ISA in this strategy is that the dividends you receive are tax-free. This means that you will receive the full amount of money, which can then be used as cash flow to buy more shares. This can really get worse over time.

I don’t think the annual limit of PLN 20,000 is necessary. pounds is so unfavorable because for most of us it will not be exceeded. Instead, it allows the investor to deposit a regular amount every month. To determine how much should be invested to achieve a goal, we need to estimate the portfolio’s profitability.

Please note that tax treatment depends on each client’s individual situation and may change in the future. The content of this article is for informational purposes only. It is not intended to be and does not constitute any form of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Based on purchase FTSE250 AND FTSE100 dividend stocks, I think you can achieve a target rate of return of 7% per year. Of course you can aim for a higher number, but in my opinion it increases the risk too much.

If we apply the 7% figure to reach £740 a month, the ISA would need to be worth £126,857. So if someone made full apply of these 20,000 pounds per year, this would be possible in just a few years. But let’s assume someone invested £500 a month. In this scenario, it would take just over 13 years to achieve this.

Of course, these are only predictions. Depending on what happens to the selected stocks in the coming years, the target date may be longer or shorter than planned.

A sturdy dividend contender

After the numbers, the next vital step is to populate your ISA with sustainable dividend concepts. One example is OSB Group (LSE:OSB). Last year, the share price did not change, but the dividend yield was 7.1%.

It is a specialist lender focusing on niches of the UK mortgage market that are often overlooked by larger banks, but it makes money in a similar way. It collects deposits from savers and then lends out that money at higher interest rates. The difference between what it earns on loans and what it pays on deposits is called the net interest margin (NIM) and remains a key factor in profitability.

When it comes to dividends, the company boasts a dividend coverage ratio of 1.95. Any number above 1 means that the income is fully covered by recent earnings per share and is a good sign. In fact, the board recently lowered its long-term capital target, potentially freeing up over £100m for shareholder returns such as dividends. This also suggests that management anticipates continuing to generate excess capital in the coming years

On the risk side, CEO Andy Golding said this in his April trading update “We are aware of the continuing uncertain geopolitical situation and its impact on the UK economy.”.

It is true that the company is highly exposed to the fate of the UK and in our situation the situation is quite uncertain.

That said, I think these shares could be a good stock for investors to consider as part of building a solid ISA.

Is it worth investing £5,000 in the OSB Group 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 check if OSB Group is on the list?

Jon Smith has no position in the stocks mentioned