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Take OpenText over CGI Group, this portfolio manager says

Darren Sissons
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.

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About The Author /

Jayson MacLean
Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.

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