As the Canadian stock market continues to reach new record highs in 2025, it’s easy to get distracted by the stocks already flying high. However, I prefer to focus on stocks that are still trading below their true worth, despite making strong progress in both performance and outlook. And for investors with patience, those lagging stocks could turn out to be the best bets for strong returns ahead.
In this article, I’ll highlight two dividend-paying, undervalued Canadian stocks that are flying a bit under the radar but have all the right ingredients in place to deliver big returns going forward.
OpenText stock
The first undervalued stock on my radar is OpenText (TSX:OTEX), a top tech stock that’s bouncing back strong in 2025 with its focus on transformation. This Waterloo-based information management software firm operates in enterprise software and serves clients across the globe.
Despite a rocky start to the year, OTEX stock has surged 48% in the last six months and is currently trading at $55.10 per share. The company has a market cap of about $14 billion and offers a quarterly dividend with a current annualized yield of 2.8%.
OpenText stock’s recent surge reflects growing investor confidence in the company following a period of operational reset. After completing its acquisition of Micro Focus more than two years ago, OpenText took steps to streamline its business and improve execution, which is now beginning to show up in its earnings.
In the fourth quarter of fiscal 2025 (ended in June), the company’s revenue rose 4.5% sequentially to US$1.3 billion. On the profitability side, its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) jumped over 12% from the previous quarter to US$443.9 million. That lifted its EBITDA margin to 33.9%, up from 32.7% a year ago. OpenText’s strong sequential growth clearly reflects that its integration strategy is working and its cloud business is gaining traction again.
Looking ahead, OpenText is now focused on driving growth through its information management cloud, cybersecurity tools, and artificial intelligence (AI)-based analytics platforms. With several product rollouts and service expansions lined up, the company plans to move customers faster into higher-margin cloud subscriptions. As those efforts continue paying off, OTEX stock’s upside from current levels could be significant.
Whitecap Resources stock
My next undervalued stock pick is from the energy sector. Whitecap Resources (TSX:WCP) is an oil-weighted energy producer headquartered in Calgary. It mainly focuses on developing petroleum and natural gas assets across Alberta and Saskatchewan.
After surging by nearly 30% over the last six months, WCP stock is currently trading at $10.67 per share with a market cap of $12.9 billion. And it pays an attractive monthly dividend with a current annualized yield of 6.9%.
Whitecap posted an outstanding 91% YoY jump in its total revenue to $1.6 billion. Although its quarterly earnings slipped to $0.17 per share due to higher costs and commodity price volatility, the company still generated $204.2 million in adjusted net profit. Even with a short-term dip in its profit margins, Whitecap’s long-term growth trajectory remains solid, supported by its strong asset base and improved production efficiency.
The company continues to focus on high-return projects and has surpassed its production targets in the latest quarter, thanks to strong performance from its Duvernay and Montney assets. As its production remains healthy and cash flows stay consistent, WCP stock’s reliable monthly dividend and undervalued stock price offer strong value for income-seeking investors who also want solid long-term returns.
