A $1,000 investment in a growth stock is a great way to start building long-term wealth, but it is important to set the right expectations. Most strong growth companies take years to reach their potential. This means you need to focus on fundamentals, market opportunity, and long-term vision rather than short-term hype. The Toronto Stock Exchange has several growth stocks that fit that profile, and now could be a good time to buy while valuations remain reasonable.
In this article, I’ll highlight one top dividend-paying growth stock from the tech sector that could be a smart addition to your portfolio today.
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Open Text stock
One TSX stock that checks all the right boxes for long-term growth could be OpenText (TSX: OTEX), one of Canada’s top enterprise software providers. This Waterloo-based company helps businesses manage and protect their digital information with a wide range of solutions, including cloud and content management, cybersecurity, and artificial intelligence (AI)-powered analytics.
Currently, OTEX stock is trading at $37.90 per share with a market cap of $10 billion. And for those who like a little income on top of growth, OpenText offers a quarterly dividend with a solid annualized yield of 4%.
That said, the stock hasn’t had the smoothest ride lately, as it has declined by 28% over the past year. While that might look concerning at first glance, it could also mean this growth stock is sitting at a more attractive entry point for long-term investors.
What’s behind the recent dip?
Besides the ongoing macroeconomic challenges and the broader market volatility, another big reason behind the pullback could be its lower-than-expected revenue in recent quarters. In the second quarter (ended December 2024) of its fiscal 2025, the company’s total revenue slipped 13% YoY (year over year) to US$1.34 billion. A lot of that drop came from lower customer support and license revenues. In addition, OpenText is still adjusting from the divestiture of its application modernization and connectivity business, which impacted comparisons from last year.
But the interesting part is that even with that decline in sales, OpenText delivered strong profits and cash flows. In the latest quarter, the company posted adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of US$501 million with a strong margin of 37.6% and generated US$307 million in free cash flow. That shows its business model has resilience even when top-line growth slows.
Why this might be a smart long-term growth pick
Even amid macroeconomic challenges, OpenText isn’t just cutting costs and riding it out. In fact, it’s actively investing in its future. Its management considers the current phase a shift toward a new era of multi-cloud, AI, and cybersecurity-driven services. That’s why the company has rolled out its next-gen cloud platform, called Titanium X, which mainly tries to help businesses better integrate data, security, and artificial intelligence.
It’s also making big moves in the AI space with its OpenText Aviator platform and opentext.ai strategy, which mainly focuses on helping customers tap into generative AI tools safely and efficiently. Put it all together, and you get strong free cash flow, a focus on cloud and AI innovation, and a dividend while you wait. Given these factors, OpenText could be a smart bet for patient investors who want to buy a solid growth stock on a pullback.
