Canadian tech name enters new era with first-ever dividend

Richard Tse, an analyst with National Bank Financial, noted that many of CGI’s American competitors pay regular dividends. He believes CGI’s decision will provide more flexibility and attract investors who focus on dividend-paying stocks.

Tse mentioned that CGI has various ways to utilize its large capital resources, including $1.2bn in cash and equivalents, for dividends, business growth, acquisitions, and share buybacks. The relatively small dividend, amounting to less than 10 percent of free cash flow, will not limit CGI’s spending capabilities.

Constellation Software Inc., Canada’s second-largest tech company by market capitalization, pays a US$1-per-share quarterly dividend and used to pay special cash dividends from excess free cash flow.

This practice ended in 2021 when a board member convinced founder and president Mark Leonard that Constellation could invest its capital more effectively than its shareholders.

The timing of CGI’s dividend announcement, outside the usual annual evaluations in January, seemed random to Moschopoulos. On Monday, CGI’s American subsidiary announced the acquisition of Aeyon, a tech company specializing in data management, analytics, and AI for the US government.