There are few businesses on the ASX with a history like Australian Foundation Investment Co Ltd (ASX: AFI) (AFIC). The longevity could be very appealing to retirees in FY27 and beyond.
AFIC is a listed investment company (LIC) that has been operating for around 100 years. Very few Australian companies can say that.
For multiple reasons, this ASX share could be a compelling pick for retirees in FY27 and beyond.
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Diversification
It can be difficult to decide which ASX blue-chip share to buy. Some retirees may have portfolios that are very focused on just one or two sectors.
Owning AFIC shares improves diversification.
For better or worse, AFIC has a different portfolio from the S&P/ASX 200 Index (ASX: XJO), offering investors something different.
Currently, its biggest holdings 10 holdings are: BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), Macquarie Group Ltd (ASX: MQG), Wesfarmers Ltd (ASX: WES), Westpac Banking Corp (ASX: WBC), National Australia Bank Ltd (ASX: NAB), Transurban Group (ASX: TCL), Goodman Group (ASX: GMG), Telstra Group Ltd (ASX: TLS) and Woolworths Group Ltd (ASX: WOW).
Those are just the largest holdings, there are plenty more that have a smaller weighting inside the portfolio, giving it further strong diversification.
I like that by owning this one investment, we indirectly buy many individual stocks.
Low management fees
Another benefit of AFIC shares is that it has a low management fee compared to many other active fund managers.
The lower the fees, the more of AFIC's returns stay in the hands of the investor, leaving more for compounding and paying dividends.
At 30 June 2026, the business had an annual management cost of 0.16%, with no performance fees or other fees.
An active fund manager may typically charge 1% management fees and outperformance fees, which can add up if the portfolio isn't significantly beating its index.
Solid dividend
Perhaps the best reason of all for retirees to like AFIC shares is the excellent passive income.
The LIC's regular dividend has been very consistent for investors over the years, with no cuts this century.
The business intends to pay a regular annual dividend per share of 26.5 cents for FY26. That translates into a grossed-up dividend yield of approximately 5.5%, including franking credits, at the time of writing.
That's not the biggest dividend yield around, but it has been very consistent for investors over the long-term and the payout could grow in the coming years.
In terms of valuation, at the time of writing, the AFIC share price is valued at a 13% discount to the pre-tax net tangible assets (NTA) of $8 as at 17 July 2026. I think a discount of more than 10% is very appealing with this LIC.
Of course, it's not the only ASX share that retiree portfolios may benefit from.
