Is CGI Stock a Buy for its 0.4% Dividend Yield?

Backed by its strong and reliable business, CGI stock is joining the list of top dividend stocks to buy for income and growth.

| More on:
A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

CGI Inc. (TSX:GIB.A) is one of Canada’s leading and most respected information technology (IT) companies. In fact, it’s a leading global $36 billion IT and business consulting services firm. It’s true that CGI stock has not paid a dividend yet, but the capital gains that it has posted over the long term have been impressive.

Let’s take a look.

CGI’s story

CGI Group was founded in 1976 by 26-year-old Serge Godin, who initially set up shop in his basement with co-founder Andre Imbeau.  Since that day, the company has honed its expertise, expanded its service and software solutions offering, and embarked on a massive growth initiative, mostly through well-timed acquisitions and an impeccable integration process.

Most recently, CGI’s third quarter fiscal 2024 results continue to reflect strong client demand, as well as strong company execution. For example, revenue came in at $3.7 billion and earnings per share increased 9% to $1.91. Additionally, the company generated a return on invested capital (ROIC) of a very healthy 16.1%. Lastly, operating cash flow increased 21% to $497 million.

Clearly, this company has been steadily growing as the world digitizes at an accelerating pace. It’s financially strong, operationally sound, and a recognized expert in its field. As you can see from CGI’s stock price graph below, all of this good stuff has not gone unrecognized. Rising revenue, cash flows, earnings, and profitability have sent the stock considerably higher.

Created with Highcharts 11.4.3CGI PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Finally, a dividend is coming

After years of strong cash flows, CGI is finally ready to initiate a dividend. It’s small, but it’s a welcomed move and clear indication of CGI’s strength. It’s important to note that this dividend does not change CGI’s acquisition strategy planned to consolidate the industry and grow. Acquisitions remain paramount to the company’s future and success.

The dividend payments will begin in the first quarter of fiscal 2025. With this dividend, CGI hopes to attract more investors, thus driving up the stock’s valuation. It adds another layer to the story and another way to return cash to shareholders.

So, CGI will start with a quarterly dividend of $0.15. The dividend yield based on CGI’s stock price today will be 0.4%. It’s not a significant yield, but it’s a start. True to its ways, CGI is embarking on this new phase with careful caution and conservatism. Given the strong cash flow growth that the company is achieving, I think we can expect a reliable, growing dividend from the company.

Looking ahead, the balance between investing in acquisitions and returning capital to shareholders will continue to be carefully considered. The growth opportunities remain strong and CGI has no intention of missing out on them.

The bottom line

An upcoming dividend from CGI is a very welcomed development for investors. While it’s small, it’s a reflection of the growth that the company has achieved over the last many years. When it comes to buying CGI stock, the dividend is just one of many reasons to buy.

The company’s business remains strong and growing, with a backlog of $27.6 billion (or 1.9 times revenue) and strong cash flows. All of this supports growth, a dividend, share buybacks, and acquisitions. All good reasons to buy CGI stock.

Should you invest $1,000 in Calian Group Ltd. right now?

Before you buy stock in Calian Group Ltd., consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Calian Group Ltd. wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

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 Karen Thomas has a position in CGI Inc. The Motley Fool recommends CGI. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

calculate and analyze stock
Dividend Stocks

Here’s How Many Shares of Brookfield Renewable You Should Own to Get $500 in Quarterly Dividends

If you want some dividends on deck, then consider this energy producer, which could provide that and more.

Read more »

TFSA (Tax free savings account) acronym on wooden cubes on the background of stacks of coins
Dividend Stocks

Here’s Exactly How $15,000 in a TFSA Could Grow Into $215,000

If you're looking to grow your $15,000 investment into $200,000, here's exactly how to get it done.

Read more »

A worker gives a business presentation.
Dividend Stocks

Navigating Economic Headwinds and Buying the Dip

If you're looking to get in on the markets, but fearful of the market dip, then here's how to navigate…

Read more »

Canadian Dollars bills
Dividend Stocks

A 10% Dividend Stock Paying Cash Every Month

This dividend stock doesn't only offer a massive income, but a variety of investments during this volatile period.

Read more »

TFSA (Tax-Free Savings Account) on wooden blocks and Canadian one hundred dollar bills.
Dividend Stocks

Income-generating Stocks That Could Accelerate Your TFSA Growth in 2025

Generate tax-free passive income in your TFSA with these two stocks and grow your wealth.

Read more »

woman looks out at horizon
Dividend Stocks

How I’d Invest $8,500 in Canadian Financial Services to Create a Wealth Legacy

Canada’s financial services sector can help you create a wealth legacy from a less than $10,000 investment.

Read more »

Person holding a smartphone with a stock chart on screen
Dividend Stocks

Is BCE Stock a Buy for its Dividend Yield?

BCE stock looks pretty appealing with a 12% dividend yield, but there's more to consider.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

TFSA: Invest $15,000 in This TSX Stock and Create $962.55 in Annual Passive Income

If there's one TSX stock to buy right now, it's this long-term hold that's been around for over 100 years!

Read more »