The Canadian fund manager, one of the nation's largest independents, said net income from continuing operations was C$7.1 million ($6.4 million), or 8 Canadian cents per share, in the period ended November 30, compared with C$13.0 million, or 14 Canadian cents per share, a year earlier.

The results included C$3.6 million in restructuring charges. Excluding the charge, core earnings were 11 Canadian cents a share, compared with 16 cents a share in the year-ago quarter.

Analysts had expected profit of 12 Canadian cents per share, according to Thomson Reuters I/B/E/S, and the earnings miss sent the firm's shares down 6 percent to C$11.64 in mid-morning trade on the Toronto Stock Exchange.

While the profit was lower than estimated, Barclays analyst John Aiken said he was focusing on the sustainability of the dividend, which was unchanged at 27 Canadian cents a share in the quarter.

"We continue to believe that AGF's dividend is undervalued and its 8.7 percent yield is quite compelling, given very little reason for AGF to make a cut," Aiken said in a research note. He

added that AGF's free cash flow was C$26 million in the quarter, above its C$24 million dividend payment.

Concern that AGF might have to cut its dividend has faded as the industry comes out of the long slump that followed the 2008 financial crisis.

Revenue for the fourth quarter was C$117.4 million, down 6 percent from C$124.9 million in the 2012 period but slightly above estimates of C$116.2 million.

While assets under management dropped to C$34.4 billion at November 30, 2013, largely due to net redemptions within institutional accounts, high-net-worth assets under management - a coveted segment of the market - rose 16 percent to C$4.0 billion.

Gross sales in the retail business rose 6.6 percent in 2013 from 2012.

Redemptions, which have plagued the mutual fund industry for the last five years as investors flee volatility in the financial market, were 33.6 percent lower in the quarter from the same period in 2012.

"Since January 2013, each month has shown improvements in the level of retail outflows as compared to the same month of the prior year," AGF noted in the report.

The C$3.0 billion drop in institutional accounts to C$10.9 billion reflected a C$2.7 billion redemption related to a single legacy account.

Aiken said the fourth quarter represents a potential inflection point for AGF's declining assets under management as retail redemptions slow and the company benefits from the launch of its UCITS (Undertakings for Collective Investment in Transferable Securities) platform. The pooled fund structure will allow AGF to serve institutional markets in Europe.

"We continue to believe that AGF is making progress in turning its operations around and believe that longer term investors should be well rewarded but compensated in the near term by its strong dividend yield," Aiken wrote.

($1 = 1.1169 Canadian dollars)

(Reporting by Andrea Hopkins; Editing by Stephen Powell and Dan Grebler)

By Andrea Hopkins