In some ways, the S&P/ASX 200 Index (ASX: XJO) itself doesn't offer a huge amount of diversification.
Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), ANZ Group Holdings Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), Macquarie Group Ltd (ASX: MQG), Bank of Queensland Ltd (ASX: BOQ) and Bendigo and Adelaide Bank Ltd (ASX: BEN) are all ASX financial shares.
BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), and Fortescue Ltd (ASX: FMG) are all miners (along with other names).
Diversification can be a powerful tool to help reduce the risk of being too exposed to one sector, without necessarily reducing returns. It's with diversification in mind that I want to highlight the ASX dividend stocks Rural Funds Group (ASX: RFF) and Duxton Water Ltd (ASX: D2O).
Exposure to the agriculture sector
Agriculture is one of the most important areas of the Australian economy, but it can be volatile and cyclical as an operator. However, there are other ways to gain exposure to this impressive industry.
Rural Funds is a real estate investment trust (REIT) that owns a diversified portfolio of farms, including cattle, almonds, macadamias, vineyards, and cropping. These farms are leased to high-quality tenants. Rural Funds also owns a portfolio of water entitlements that are available for tenants to utilise.
Duxton Water invests in a portfolio of water entitlements and leases them to farmers on a short-term or long-term basis.
Good dividend income
Both ASX dividend stocks generate lease cash flow from their assets, allowing them to pay pleasing passive income to investors.
While they may not have the biggest dividends around, I'd describe them as sustainable and at a size that can allow them to increase the payouts in the future.
Rural Funds is expecting to pay a cash distribution of 11.73 cents per unit in FY26, which translates into a forward distribution yield of 6.1%. That's far better than what's on offer from a 12-month term deposit these days.
Turning to Duxton Water, its last two declared dividends come to a total of 7.43 cents per share. That translates into a grossed-up dividend yield of 7%, including franking credits.
Neither of them has given investors a payout cut since they listed in the 2010s, which is a pleasingly consistent record.
The ASX dividend stocks trade at a discount to their underlying value
I wouldn't advocate buying an ASX dividend stock just for the sake of diversification. I'd also want to know that it's good value.
Are both of these businesses at a good price? Let's take a look.
At the end of August 2025, Duxton Water had a reported post-tax net asset value (NAV) of $1.67, suggesting the current share price is trading at a discount of 9%.
Meanwhile, at June 2025, Rural Funds reported it had an adjusted NAV of $3.08. That implies it's trading at a 38% discount to its underlying value, as of the time of writing.
Following multiple RBA rate cuts, I believe both of these ASX dividend stocks are trading at attractive prices and look very appealing for dividend income.
