Canadian investors looking to gain outsized exposure to top Canadian growth stocks certainly have plenty to consider right now. Of course, those who already adjusted their portfolios toward a more risk-on stance have performed well. But at current valuations, there are certainly reasons for many investors to take a more cautious tone right now. I think more defensive positioning makes sense overall, but I’m also very aware that retaining some exposure to high-quality growth stocks makes sense at this point in the cycle as well.
For those looking to maintain such positioning toward higher-quality growth stocks, here are three top picks I think are worth owning for the remainder of the year and into 2025.
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OpenText Corporation
Open Text (TSX: OTEX) provides information management software solutions and services to global companies, SMBs, consumers, and governments. The products offered by the company in its portfolio include content cloud, cybersecurity cloud, business network cloud, IT operations management cloud, application automation cloud, and analytics cloud.
For fiscal 2024, OpenText reported revenue of $5.8 billion, a disappointing number compared to the previous one, though still pretty impressive. The company’s quarterly revenue grew by 8.6%. However, it can be remembered that OpenText does need to get through a fairly challenging macroeconomic environment, as it is more a hill in the road than a detour.
For shareholders, OpenText has a very attractive dividend yield of 3.6% with a somewhat moderate payout ratio of 58.5%. It is a great attraction to investors who are into dividends. Hence, with strong cash generation, OpenText is the one well-positioned to ensure that investors get rewarded even if it needs to reinvest for growth.
Lightspeed Commerce
Lightspeed Commerce (TSX: LSPD) is a Canada e-commerce software and point-of-sale provider. The company helps customers interact with their consumers, control the running of their operations, expand their business, and accept payment using the software. Notably, Lightspeed is a top operator in Canada but also has operations in the United States, Australia, the Netherlands, and other countries.
Lightspeed Commerce believes to achieve total revenue growth of at least 20% during fiscal 2025. The growth will mainly come from subscription revenue, such as sales outbound, price increases, and software selling.
Transaction-based revenue is expected to deliver significant growth in the second quarter (Q2) fiscal 2025 because it will continue to expand the adoption of the company’s payments and capital offerings. Moreover, it does appear the company’s growth prospects are on the upswing, so profits may soon come for this $3.4 billion commerce software company.
Telus
Telus (TSX: T) provides various ranges of communication products and services, including data services, voice, IP, mobile, television, and several other related services. It is one of the big three wireless service providers in Canada, with more than nine million subscribers for mobile phone services across the country.
Telus paid out roughly 83% of its free cash flow over the past 12 months, having significantly improved over a comparable period in 2023. It has established its payout range to be between 60% and 75%. Although the current level is above this range, it can reach the target on a prospective basis, meaning the payout is safe and very well covered.
News recently indicates that Telus is brewing some attractive plans that may really be a big boon to its cash flow and help in improving the momentum of its dividend growth. Telus should provide consistent cash flow growth over time if the company’s management team can continue to increase efficiencies and spin off other segments as well.
