Canada’s information technology sector is much smaller compared to that of the U.S., although it wields significant market influence and is growing. The TSX posted a positive 2.17% gain in 2020, notwithstanding the global pandemic, largely due to Canadian tech stocks led by Shopify.
As of this writing, the IT sector is up 21.4%, the second-best-performing sector thus far. However, not all constituents have kept pace with the TSX’s hot winning streak in 2025. For instance, Enghouse Systems (TSX:ENGH) trades at a discount. This rare gem is an undervalued opportunity for long-term dividend investors. You may consider taking a position while awaiting a price rebound.
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Business snapshot
The $1.2 billion software and services company develops and sells mission-critical software solutions. Enghouse serves enterprises across various vertical markets. It has two core business segments, the Interactive Management Group (IMG) and the Asset Management Group (AMG), each serving a unique customer base.
Under IMG is customer interaction solutions, as well as the Specialty Product Group that provides solutions for device asset management, call accounting, marketing communications, and telecom expense management. The interactive portfolio aims to transform the customer experience.
AMG consists of two groups: Networks and Transportation & Public Safety. The former serves the communications and media, utilities, and defence sectors, while the latter’s software solutions are for transit, supply chain, and public safety.
Besides the business growth strategy, Enghouse continues to pursue acquisition opportunities. The acquisition strategy is basically a buy-and-hold approach. Prospects include public or private companies that generate $5 million to $50 million in revenues, preferably with strong recurring revenue and good customer retention. Its most recent acquisitions are Acculab (England), Margento (Slovenia), and Trafi (Lithuania).
Payout record
Most tech companies usually don’t pay dividends and would rather allocate funds for expansion, product development, or innovation. Enghouse Systems is a rare gem. It stands out because of its 40 consecutive quarterly dividend payments. ENGH started paying dividends in Q2 fiscal 2016.
If you invest today, the share price is $20.45, while the dividend yield is 5.9%. However, the year-to-date loss is 21.9%. The hefty payout compensates for the stock’s temporary weakness.
Sustained profitability
The enterprise software company has reported consistent annual profitability in the last four years. However, the ongoing macroeconomic uncertainty and difficult market environment affected its financial performance in 2025. Over three quarters in fiscal 2025 (nine months ending July 31, 2025), revenue and net income declined 0.6% and 10.5% year-over-year to $374.4 million and $52.5 million, respectively.
Meanwhile, the positives in Q3 fiscal 2025 include the positive net income ($17.2 million) and cash flows provided by operating activities ($27.1 million). Notably, the recurring revenue base accounts for 70% of total revenue. For Q4 fiscal 2025, Enghouse intends to complete accretive acquisitions, maintain profitability, and generate positive cash flows while adapting to evolving market conditions.
Decisive edge
Enghouse Systems is forward-looking and always focused on driving sustainable long-term growth. The company’s decisive edge in acquiring, integrating, and operating companies globally is its strong balance sheet and debt-free status. Buy this perfect dividend stock now before the impending price recovery.
