Tech stocks have done well to start off 2019, with Canadian names like CGI Group (CGI Group Stock Quote, Chart TSX, NYSE:GIB.A) and OpenText (Open Text Stock Quote, Chart TSX, NADSAQ:OTEX) both posting handsome gains early on. The two companies bear a number of similarities, but for investors looking for a steady payout with their tech investments, OpenText’s dividend makes it the more attractive option, says Darren Sissons, portfolio manager at Campbell, Lee & Ross.
“I think that they’ve both been very good performers, so we do have some world-class tech here. In essence, where I come out is that one pays a dividend and one doesn’t,” says Sissons, to BNN Bloomberg last Friday.
Over the short term, OpenText has outperformed CGI, rising 13.2 per cent year-to-date versus CGI’s 6.7 per cent gains in 2019. But CGI has been the better stock over the longer term, posting a 12-month return of 20.8 per cent compared to OTEX’s 12.6 per cent and a five-year return of 147 per cent compared to OTEX’s 77 per cent return.
By market capitalization, CGI Group is almost twice the size of OpenText at $24.5 billion versus OpenText’s $13.2 billion. OpenText’s dividend, a bit of a rarity in the tech sector, stands at 1.6 per cent, whereas CGI has no dividend.
“Both are effectively acquisition growth stories and they’ve had a very good total return story over multiple years,” says Sissons. “So, just on the basis that I like to get paid to wait a little bit, I would favour OpenText. But for those that don’t need a dividend, I think CGI is a great company as well.”
Montreal-based CGI last reported its earnings on January 30, generating Q1 revenue of $2.96 billion, representing a 5.0 per cent increase year-over-year, and a profit of $311.5 million, a 9.1 per cent improvement over the previous year. At $1.11 per diluted share, CGI’s profit matched analysts’ consensus of $1.11 per share.
Waterloo-based OpenText reported its latest earnings on January 31, posting revenue of $735 million, a slight 0.1 per cent year-over-year uptick, and Adjusted EBITDA of $308 million, a 6.1 per cent year-over-year growth. (All figures in US dollars.) The Q2 earnings came out to be $0.80 per share, beating the consensus estimate of $0.70 per share.
National Bank Financial recently published a Technology report where it reviewed over two dozen Canadian exchange-listed tech stocks under coverage,...