The Pinnacle Investment Management Group Ltd (ASX: PNI) share price has seen its fair share of pain within the past couple of years, dropping 36%, as the below chart shows. It could be a compelling choice for passive income at today's valuation.
This company takes stakes in funds management businesses (affiliates) and helps them grow. Pinnacle says it's a high-quality, scalable multi-affiliate platform compounding earnings and dividends through cycles.
It's invested in 19 affiliates across public and private markets, spanning asset classes, investment styles and geographies. These affiliates have a long-term track record of delivering sustained outperformance over their benchmarks.
Strong long-term growth
I think it's important not to lose sight of long-term performance, particularly if the business has been afflicted by short-term volatility. Over time, the market should realise the company is a high-performer and is delivering strong underlying growth.
In the five years to 30 June 2025, the company delivered a compound annual growth rate (CAGR) of 33% for net profit after tax (NPAT), 28% for earnings per share (EPS), and 31% for dividends per share.
The ASX share reported that it achieved aggregate affiliate funds under management (FUM) of $208.1 billion at 31 March 2026. That's 2.9% growth since 31 December 2025 and 16% growth since 30 June 2025.
Plus, 31 March 2026 was a low point for the global share market – it has risen by high single digits since then (in percentage terms), so it looks like another strong financial year for FUM growth.
In the three months to 31 March 2026, aggregate affiliate FUM net inflows came to $9.4 billion, including $1.6 billion of Australian retail net inflows, $5.2 billion of international net inflows and $2.6 billion of Australian institutional net inflows.
I think it's a great time to invest when there's market volatility because fund managers are exposed to market declines, but then they benefit strongly when the market eventually recovers.
The long-term investment performance of the funds and the ongoing net inflows are a great sign for further earnings growth.
Great option for passive income
As I've mentioned, the business has delivered excellent dividend growth this decade, and I think it has great potential to increase its dividend significantly by 2030.
Based on the latest two dividend payments, it has a grossed-up dividend yield of around 4.75%, including franking credits. I think it's likely to continue growing in the coming years.
According to the projection on Commsec, the business is forecast to pay an annual dividend per share of 83 cents in FY27. If the business delivers that payout, it would be a grossed-up dividend yield of more than 7%, including franking credits, at the time of writing.
I think this is a great time to invest for the long-term in the ASX share.
The post A 7% yield but down 36%! Is it time for me to buy this ASX share to earn passive income? appeared first on The Motley Fool Australia.
Motley Fool contributor Tristan Harrison has positions in Pinnacle Investment Management Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool Australia has positions in and has recommended Pinnacle Investment Management Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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