Take OpenText over CGI Group, this portfolio manager says

“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.