I love the idea of living off passive income from ASX dividend shares.

Some ASX-listed companies aim to pay good dividends to shareholders each year, making them appealing cash flow prospects.

Below are three stocks I'd want in my portfolio if I were starting out with $20,000 and aiming to generate $5000 in annual dividends.

Soul Patts is a diversified investment house that owns a variety of investments across a number of different industries. These include building products, property, credit, financial services, agriculture, swimming schools, healthcare and so on.

It has paid a dividend every year since listing in 1903. And it has grown its annual ordinary dividend each year since 2000 — the longest streak on the ASX. That's not guaranteed to continue, but it shows the leadership's desire to keep paying dividends.

Each year, Soul Patts harvests the investment cash flow its portfolio receives and sends some of the money to shareholders in the form of a larger dividend. With the retained cash flow, the ASX dividend share makes new investments to hopefully drive future dividend growth.

It currently has a grossed-up dividend yield of 3.8%.

GQG is a fund manager headquartered in the United States. It aims for additional growth by expanding into other countries and using different investment strategies, such as dividend stocks.

The company charges minimal (if any) performance fees on most of its funds. Most of its revenue comes from management fees, so its funds under management (FUM) growth is essential.

In the latest update for March, GQG's FUM rose from US$137.5 billion to US$143.4 billion, a strong rise in one month that makes it more likely the company's dividend can grow in the short term.

In the three months to 31 March 2024, the ASX dividend share experienced net inflows of US$4.6 billion, meaning households and institutions gave GQG more money to manage.

If GQG keeps making good net returns within its investment funds and continues seeing net inflows, I think the dividend income will be strong. It targets a dividend payout ratio of 90% of distributable earnings.  

According to Commsec, it could pay a dividend yield of 7.6% in FY24.

Telstra is the leading telecommunications business in Australia, with the strongest market position and the largest network coverage.

The ASX dividend share's huge subscriber base allows it to invest more in infrastructure than its rivals, enabling it to stay ahead of the competition. The more users, the more the infrastructure is being utilised, which can help improve the company's efficiencies and margins.

Telstra's lead in 5G could be important if it unlocks high-margin offerings like 5G-powered broadband to compete with the NBN (and take much of the broadband margin). 5G may also lead to new data connections/devices that haven't been invented yet.

The Telstra board is using the company's growing profit to pay bigger dividends. In FY24, it's projected to pay a grossed-up dividend yield of 6.8%, according to Commsec.

If we evenly split $20,000 between those three names, the average grossed-up yield would be just over 6%, creating $1,200 of annual income.

Then, a combination of company-initiated dividend increases, re-investment of dividends into more (ASX dividend) shares, and the introduction of new, saved money into my portfolio could help me grow it to $5,000 over time.  

If the portfolio grew at 10% per annum and kept a 6% dividend yield (and we allocated no new money), it would take 15 years to reach a $83,333 portfolio value and pay $5,000 of dividends per year.

If we added $500 per month to the portfolio, it could take less than seven years to reach $83,333.