CGI Inc. to pay its first dividend in 2025, marking a new chapter for the Canadian tech giant
CGI Inc. is offering its first-ever dividend, becoming one of the few large Canadian tech firms to distribute profit-sharing payments to investors, according to The Globe and Mail.
The Montreal-based consulting company announced it would start paying a quarterly cash dividend of 15 cents per share in the first quarter of 2025.
This announcement coincided with CGI reporting net earnings of $440.1m in its third quarter and revenue of $3.67bn, an increase of $50m from the previous year. These earnings translate to $1.94 per basic share, up 16 cents from last year.
CGI, Canada's third most valuable publicly traded technology company, joins Constellation Software Inc., Enghouse Systems Ltd., and Open Text Corp. as the only tech firms among the ten largest on the Toronto Stock Exchange to pay dividends.
Unlike the tech sector, all major players in financials, real estate, utilities, and telecom services on the TSX pay dividends.
CGI’s quarterly dividend will be the smallest among these tech firms, with Open Text paying 25 US cents per share, Constellation Software paying US$1, and Enghouse Systems paying 26 cents per share.
Thanos Moschopoulos, an analyst with BMO Capital Markets, stated that a dividend makes sense for mature companies like CGI. “It’s a company that many investors felt should be paying a dividend given their strong and consistent cash flow generation,” he said.
Moschopoulos explained that Canada has few dividend-paying tech stocks because many are not large or mature enough to support regular cash distributions. “Smaller companies have more volatility, and fast-growing companies might prefer more flexibility with their cash,” he added.
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.
While the deal's value was not disclosed, Moschopoulos estimated it would add 1 percent to CGI’s revenue. Earlier this month, CGI also acquired Celero, a Canadian tech services provider, from three Prairie credit union centrals. The financial terms of that deal were also not disclosed.
