Clime Capital pays an 8.7% dividend yield. Pitt Street Partners says it's undervalued

Pitt Street Partners has singled out Clime Capital Ltd (ASX: CAM), a small listed investment company (LIC) focused on Australian shares, for its potential significant upside and healthy dividend.

The broker has issued a new research note on the company, with a bullish share price target. But first, let's have a look at the fund's recent performance and some of its fundamentals.

Solid returns over the long term

Starting with total shareholder return (TSR), Pitt Street said that the company has delivered a gross annual return of 10.38% since inception in 2009.

More recently, the company paid a special dividend following the announcement of its FY26 results on 5 October, after chalking up a pre-tax profit of $13.4 million.

And according to ASX data, the company is currently paying an 8.8% dividend yield.

What's of particular interest, and what has been called out by Pitt Street, is that the company is trading at a steep discount to its net tangible asset (NTA) backing of 81 cents, last reported on 2 November.

In contrast, the company's shares are changing hands for just 63 cents.

Pitt Street notes that this discount is not unusual in the LIC sector, but argues that there is money to be made if the discount to NTA closes from about 25% to about 10%.

The discount to NTA has widened even further since the note was published early on 5 November to about 28%.

The broker added:

How could CAM achieve this? We think if it can maintain its outperformance into FY27 this will be the biggest catalyst. Sustained outperformance is the single most powerful driver of discount narrowing in the LIC sector. We would remind investors that FY26 delivered 17.7% gross returns (representing a 12% outperformance) and July's 1.8% gain covering the quarterly dividend.

Pitt Street said Clime had a "disciplined and opportunistic" approach to trading, giving it a repeatable investment process which would strengthen investor confidence in the company.

The broker added:

Finally, CAM's liquidity profile is improving, and higher turnover typically narrows discounts over time.

Clime's best investments for FY26 were BHP Group Ltd (ASX: BHP), Rio Tinto Ltd (ASX: RIO), Woolworths Group Ltd (ASX: WOW), and Woodside Energy Group Ltd (ASX: WDS).

Its worst performers were Telix Pharmaceuticals Ltd (ASX: TLX), Origin Energy Ltd (ASX: ORG), and Jumbo Interactive Ltd (ASX: JIN).

Pitt Street has calculated that Clime could grow to an NTA of 89 cents to 98 cents per share this financial year, which, applying a 10% discount, implies a share price of 80 cents to 89 cents per share.

Clime is currently valued at $84.5 million.

Foolish takeaway

Listed investment companies do usually trade at a discount to their NTA, but this discount does look particularly steep.

The dividend yield is attractive on its own, and the possibility of share price upside is food for thought.

The post Clime Capital pays an 8.7% dividend yield. Pitt Street Partners says it's undervalued appeared first on The Motley Fool Australia.

Motley Fool contributor Cameron England has positions in Telix Pharmaceuticals. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Jumbo Interactive and Telix Pharmaceuticals. The Motley Fool Australia has recommended BHP Group, Jumbo Interactive, and Telix Pharmaceuticals. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The Motley Fool's purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson. 2026