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Profitable businesses can be great sources of extra money. But building a portfolio that can generate significant passive income in a stocks and shares ISA takes time.
That's why the most important thing investors should look for is a company with solid long-term prospects. And I think there are a couple of them that could help investors get off to a great start.
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Games workshop
I think investors starting from scratch right now would do very well considering stocks. Games workshop (LSE: GAW). The stock has a dividend yield of just over 3%.
It may not seem like much, but there is something important to keep in mind. The thing is, the company has an excellent track record of increasing its distributions to shareholders in recent years.
While the company has strong intellectual property, war hammer It's not a product that people strictly need. That means there is always the risk of lower profits in an economic downturn.
Despite this, the business has shown impressive resilience in the past. And while this is no guarantee of future success, I think it is something investors should pay attention to.
Supermarket Income REIT
Another investment that I think is worth investigating is Supermarket Income REIT (LSE:SUPR). The company is a real estate investment trust (REIT) that leases a portfolio of commercial properties.
Right now, the stock has a 9% dividend yield, so it can start generating a lot of cash for investors right off the bat. And their existing leases still have a long time left on average.
One risk investors should keep in mind is the fact that more than 50% of the company's revenue comes from two tenants. And that puts it in a weak position when negotiating future rent increases.
However, it is important to note that Tesco has been increasing the number of stores since 2020. And that is a very positive thing in terms of demand for Supermarket Income REIT properties in the long term.
Starting from scratch
Games Workshop delivers strong growth and Supermarket Income REIT delivers high initial yield. Together, I think they could form a solid passive income portfolio.
Over the past five years, the two together have achieved average annual dividend growth of 15%. Combine that with an average initial yield at current prices of 6% and the result looks interesting.
Investing £100 a month at that rate of return could build a portfolio that generates more than £1,500 a year in dividends after 10 years (although that's not guaranteed). And the equation looks even more attractive in the long term.
Continuing to invest at that rate for 20 years increases the return to £7,375 a year and £31,301 after 30. And with a stocks and Shares ISA, none of that has to be paid in dividend tax.
Regular investment
Starting from scratch, I believe it is possible to earn over £7,000 a year in dividends by investing just £100 a month. And this doesn't depend on getting lucky with a single action.
Games Workshop and Supermarket Income REIT are two stocks that I think could turn an empty ISA into a passive income machine.
