TFSA Investors: 2 Overlooked Tech Stocks That Pay Dividends

If you’re looking for that rare tech stock that pays dividends, Open Text Corp (TSX:OTEX)(NYSE:OTEX) could be a worthy candidate.

| More on:
Financial technology concept.

Image source: Getty Images

Tech stocks aren’t known for paying dividends.

With most tech companies focused on growth, they generally prefer to invest their money rather than pay it out to shareholders.

Over the last five years, that has worked out well, with the NASDAQ having outperformed the S&P 500 by 29%.

If you’re looking for big capital gains, tech stocks have historically been your best option. If you want to get some of that tech money while also earning dividends, you’re not entirely out of luck either. Though their yields are usually low, there are a select handful of tech stocks that pay cash to shareholders. Some of them even offer excellent dividend growth. The following are two of the best ones currently trading on the TSX.

Open Text

Open Text (TSX:OTEX)(NYSE:OTEX) is an enterprise software company that offers content management, collaboration, customer experience and data analytics solutions.

The company is investing heavily in AI, especially in its data analytics software. It’s also spending big money on acquisitions and has, in fact, acquired the lion’s share of its software offerings by buying out smaller companies.

This strategy has worked out well for Open Text over the years. In its most recent quarter, it increased its net income by 17% year over year and its operating cash flow by 12% year over year.

Open Text shares pay a dividend that yields 1.75% annually as of this writing. Additionally, the company has seen spectacular dividend growth over the past five years, with an average annual dividend increase of 19%. Remember, dividend investing isn’t just about the yield you can get today; it’s just as much about where the payout will be tomorrow, and OTEX is very promising in this regard.

Constellation Software

Constellation Software (TSX:CSU) is a diversified software company that develops a number of back-end solutions for businesses.

Its software offerings provide industry-specific functionality to businesses, including food & beverage, services, utilities and public sector management. Its niche focus gives many of its subsidiaries “economic moats” that keep them safe from competition.

The company’s strategy of acquiring highly niche-focused software companies has paid off, with its stock having risen more than 480% since 2014. This year, the company is still growing at an impressive rate, having increased revenue by 12% and adjusted EBITDA by 19% in the most recent quarter.

CSU stock would be a worthy pick just based on growth alone. However, that’s not the only benefit it offers. In addition to strong growth prospects, the stock also offers a dividend, and while the yield is very low at 0.4%, it has seen some increases over the years.

While Constellation Software isn’t quite the income earner Open Text is, it has stronger growth prospects, so this may be a good play if you want to get a mix of income and growth in your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Constellation Software. The Motley Fool recommends Open Text and OPEN TEXT CORP.

More on Dividend Stocks

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

Passive Income: 2 Safe Dividend Stocks to Own for the Next 10 Years

Dividend stocks such as Manulife and Fortis can help you generate a stable and recurring passive-income stream.

Read more »

Young woman sat at laptop by a window
Dividend Stocks

3 Dividend Stocks Everyone Should Own for the Long Haul

For investors looking for top-tier dividend stocks to buy and hold for the long term, here are three of my…

Read more »