1 of the Best Canadian AI Stocks (With Dividends) to Buy Now

Despite OpenText’s strong financial growth trends and AI-focused initiatives, recent declines make this Canadian AI stock look really attractive to buy for the long term.

| More on:
Illustration of data, cloud computing and microchips

Source: Getty Images

Artificial intelligence (AI) has emerged as one of the most exciting and disruptive technologies in the last few years, and that seems to be on the path to revolutionizing various industries and sectors. Besides the growing popularity of large language models like OpenAI’s GPT and Google’s Gemini, AI technology broadly has many applications and use cases.

AI and machine learning could be used for optimizing processes, enhancing customer experiences, and generating insights from massive amounts of data. This is one of the key reasons why AI could become a huge market opportunity for companies that can leverage it effectively. According to a report by Precedence Research, Canada’s AI market size was valued at US$43.7 billion in 2022 and is expected to grow at a compound annual growth rate of roughly 19% over the next decade.

A top Canadian AI stock to buy now

One of the Canadian companies that has been investing heavily in AI technology is OpenText (TSX:OTEX), which is best known for its enterprise information management software and cloud services. It currently has a market cap of $11.3 billion as its stock trades at $41.48 per share with nearly 26% year-to-date losses. After the recent declines in its share prices, however, this Canadian AI stock’s annualized dividend yield has risen to 3.3%.

This Waterloo-headquartered software firm helps businesses manage, secure, and extract value from their data and content using various AI-powered solutions. Now, let me explain why OpenText could be one of the best Canadian AI stocks to buy right now.

Top reasons to buy this AI stock in 2024

While OpenText stock has witnessed a sharp downside correction in 2024 so far after rallying by 39% last year, its recent declines don’t seem to completely reflect its long-term growth potential. In the 12 months (ended in March 2024), the tech firm’s total sales jumped 51.4% YoY (year over year) to US$5.9 billion with the help of continued strength in its cloud and annual recurring revenues. Despite challenging macroeconomic environment and inflationary pressures, OpenText registered a strong 28.5% YoY jump in its adjusted earnings during the same period to US$4.10 per share, exceeding Street analyst expectations of US$3.92 per share by a healthy margin.

Besides its solid financial growth trends, another key factor that makes OTEX an amazing long-term growth stock to buy now is its robust portfolio of AI solutions designed for a range of industries and applications.

For example, its Magellan platform utilizes natural language processing, machine learning, and advanced analytics to derive insights and recommendations from both structured and unstructured data. Similarly, the company’s cloud-based Core Experience Insights tool leverages AI to analyze customer behaviour and engagement across digital platforms. Such innovative AI solutions are likely to drive OpenText’s future sales and earnings growth as more businesses adopt digital transformation over the next decade.

Moreover, OpenText’s continued focus on strategic acquisitions, cloud expansion, and returning value to shareholders through share buybacks and dividends make this AI-focused company worth investing in now. Despite all these positive factors, OTEX’s recent declines have also made its stock look undervalued, especially based on its long-term growth potential.

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.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool recommends Alphabet. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Dividend Stocks

Increasing yield
Dividend Stocks

2 High-Yield Dividend Stocks to Buy as They Bounce

These top dividend stocks still look cheap.

Read more »

ETF chart stocks
Dividend Stocks

The Best Canadian ETFs $100 Can Buy on the TSX Today

These three ETFs are the perfect options for investors looking for growth, income, and a base to hold long term.

Read more »

money cash dividends
Dividend Stocks

TFSA Pension: How to Earn $4,750 Per Year in Tax-Free Income

Here's why the TFSA should be an integral part of your retirement savings strategy.

Read more »

Man considering whether to sell or buy
Dividend Stocks

TELUS Stock: Buy, Sell, or Hold?

TELUS (TSX:T) stock has seen operational improvements but still remains down on a year-over-year basis. So, is it worth it?

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Dividend Stocks

Retirees: 2 Top TSX Dividend Stocks That Still Look Oversold

These great Canadian dividend stocks now offer high yields.

Read more »

edit Balloon shaped as a heart
Dividend Stocks

2 Dirt-Cheap Retail Stocks Fit for Dividend Lovers

Metro (TSX:MRU) and another great retailer that could be ripe for buying in May 2024 for the next three years.

Read more »

Dividend Stocks

Bull Market Buys: 1 Magnificent Stock to Own for the Long Run

This one cyclical stock could be the best long-term option for investors, especially while shares still offer a steal of…

Read more »

Paper airplanes flying on blue sky with form of growing graph
Dividend Stocks

Outperform the TSX With This Lucrative Dividend Stock

Hydro One is a dividend stock that should beat the TSX index due to a widening earnings base and rising…

Read more »