The ASX dividend stock Australian Ethical Investment Ltd (ASX: AEF) has fallen heavily, it's actually down 41% from August 2025. It's down even more from its peak in 2021, though I'm not going to focus on that previous share price as its price/earnings (P/E) ratio may have been too stretched then.
Australian Ethical provides investors with investment management products that "align with their values and provide long-term, risk-adjusted returns. It offers both managed funds and superannuation. I'm excited by the superannuation division because of the steady inflows that provides.
The business recently announced its FY26 half-year result, which included several strong numbers, giving me confidence that the business could be a strong long-term investment.
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Great result
The report was for the six months to 31 December 2025.
The ASX dividend stock revealed that underlying revenue increased 13% to $65.8 million and operating expenses increased by 9% to $45.1 million.
The strength of its operating leverage meant that its profit grew at a faster pace. Underlying profit after tax climbed 25% to $14.4 million and statutory net soared 42% to $13.3 million.
Underlying earnings per share (EPS) grew by 24% to 12.54 cents per share, allowing the interim dividend to be hiked by 60% to 8 cents per share. That means the business is holding onto a significant amount of its generated profit to reinvest for future opportunities.
The business reported that its funds under management (FUM) reached $14.08 billion and it saw continued positive organic net flows of $0.26 billion, with superannuation net flows increasing 19% year-on-year. It also noted its funds delivered a positive investment performance of $0.16 billion.
Why I think this is a good time to invest in the ASX dividend stock
Australian Ethical noted that it has transitioned to a single administration platform, laying the groundwork for enhanced member services and ongoing cost savings.
The company's underlying cost-to-income (CTI) ratio improved from 71.4% in FY25 to 68.8% in the first half of FY26, showing that its margins are capable of increasing and could bode well for ongoing operating leverage as the years go by.
Australian Ethical is expecting to grow profit, with positive net flows expected to continue in the second half of FY26.
With the Australian Ethical share price down significantly in recent times, this looks like a compelling time to invest because the grossed-up dividend yield has been boosted to around 5%, including franking credits, at the time of writing.
Further dividend growth looks possible, meaning the business can provide even more passive income to investors.
