I think it's particularly important these days to pay attention to where your dividend income is coming from.
Dividends are not guaranteed things, we've seen from Telstra Corporation Ltd (ASX: TLS) in recent years.
I think you can build a reliable dividend portfolio starting with these three ASX dividend shares:
Duxton Water Ltd (ASX: D2O)
Duxton Water is perhaps the only one of its kind on a stock exchange in the world. It owns water entitlements and leases them to agricultural businesses.
Water is needed every year, so there's always going to be some level of demand. These days water prices have risen substantially due to the drought conditions faced by regional areas.
Water values may fall temporarily in future rainy years (which I think would be an attractive buying opportunity), but over the long-term the value of water is probably going to keep climbing with inflation and rising agricultural demand.
It's also useful that water doesn't depreciate in value like a building. It currently offers a grossed-up dividend yield of 5.2%.
Future Generation Investment Company Ltd (ASX: FGX)
Future Generation is a listed investment company (LIC), but it doesn't charge any management fees or performance fees. Instead, it donates 1% of its assets to charities focused on youth.
The Future Generation money is invested across a range of leading ASX-focused Australian fund managers who work for free. As you can imagine, the underlying assets are very diversified with all of the different fund portfolios. A bonus is that if the fund managers outperform the index then there are no performance fees.
One of Future Generation's main aims is to grow its dividend. It currently offers a grossed-up dividend yield of 5.7%.
WAM Microcap Limited (ASX: WMI)
WAM Microcap is another LIC, but this one is run by Wilson Asset Management (WAM) to target smaller ASX growth shares and pay out some of the profits made in the form of a growing dividend.
There are a number of hidden treasures in the small cap world that are worth investing in, which is why I think it could be a good idea to invest with a fund manager which has a history of outperformance and has a diverse portfolio.
It currently has a grossed-up dividend yield of 5.3%.
Foolish takeaway
All three of these dividend shares have a solid starting yield and they all want to keep growing the dividend for shareholders. At the current prices I think I would go for WAM Microcap due to the discount to the underlying assets it's trading at and the ability to generate strong returns into the future.
