Australian Foundation Investment Co Ltd (ASX: AFI) (AFIC) shares are in the spotlight today after it announced its HY26 result and a special dividend.
AFIC is Australia’s largest listed investment (LIC), mostly targeting large ASX shares to deliver investment returns for shareholders and paying dividends.
HY26 result
Here are some of the highlights from the result for the six months to 31 December 2025:
- Half-year net profit was $147 million, down 5%
- Annualised management expense ratio of 0.11%
- The portfolio return for half-year was negative 2% including franked (compared to positive 4.2% for the benchmark)
- Interim dividend per share maintained at $0.12
- Special dividend of $0.025 per share
Let’s see why the portfolio underperformed.
What happened to the investment returns?
AFIC reported that a number of its long-term holdings in the portfolio underperformed the market during the year.
Those underperforming holdings include CSL Ltd (ASX: CSL), ARB Corporation Ltd (ASX: ARB), James Hardie Industries plc (ASX: JHX), Reece Ltd (ASX: REH) and CAR Group Ltd (ASX: CAR).
In addition to that, some of the sectors that AFIC doesn’t normally invest in, such as small and medium-sized resource shares were up substantially, with the one-year returns for those sectors up 73% and 104.3%, respectively. Gold, which is included in those figures, was up 127% for the year.
AFIC noted that it continued to trim its positions in Wesfarmers Ltd (ASX: WES) and Commonwealth Bank of Australia (ASX: CBA). It said they are “extremely over-valued”. The LIC said “any subsequent falls in their respective share prices give us the potential to buy back into these companies as their share prices start to better reflect fair value.”
It also sold Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Netwealth Group Ltd (ASX: NWL), WiseTech Global Ltd (ASX: WTC) and James Hardie.
Its buying was concentrated in two blue-chip companies where it sees an “attractive dividend yield combined with high-quality and attractive valuation”. Those stocks were Woolworths Group Ltd (ASX: WOW) and Telstra Group Ltd (ASX: TLS).
AFIC also noted that its international portfolio has reached $170 million after the initial $103.5 million investment in May 2021. But, at this stage, it’s not planning the listing of a separate fund. It will focus on a smaller number of holdings with a more concentrated portfolio.
Is the AFIC share price a buy?
The LIC believes that the market looks expensive, especially against long-term averages for the market’s price to earnings ratio (P/E ratio) and dividend yield.
It has “been able to take advantage of buying opportunities in selected companies” that it thinks are “high quality and have attractive long term growth prospects”.
I think AFIC is a solid LIC and recent underperformance is a good buying opportunity as it trades at a fairly good discount to its underlying portfolio value.
I believe it’s one of the most stable ASX dividend shares around because of its diversified portfolio.
