Telecom giants such as BCE (TSX:BCE) and Telus (TSX:T) have underperformed the broader markets in recent years. BCE cut its dividend in 2025, and Telus shelved any plans to raise its payout as both companies prioritize paying down towering debt loads.
That leaves income investors hunting for a better home. OpenText (TSX:OTEX) is the one dividend stock I’d buy instead, and here’s why.
OpenText is a software company that manages enterprise content, meaning the contracts, emails, documents, and regulated data that large organizations run on.
A person stands in front of several doors representing different U.S. stock options for Canadian investors.
Why Canadian telecom dividends are struggling right now
BCE and Telus built enormous networks over the last decade, and borrowed heavily to do so. When interest rates rose, the debt load increased significantly, making the dividend payout unsustainable.
BCE responded by cutting its dividend outright in 2025, while Telus paused any future dividend hikes to redirect cash flow towards debt reduction.
OpenText, by contrast, is moving in the opposite direction. The company recently expanded its share buyback program by US$500 million.
At recent prices, that represents roughly 8% of shares outstanding. Management is also keeping its dividend intact while targeting a debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio in line with its historical average of around 2.5 times.
OpenText’s cloud transition key for Canadian investors
OpenText Executive Chair Tom Jenkins made his vision clear at the Scotiabank Telecom, Media and Technology Conference in March 2026. He pointed to what SAP and Oracle did over the past decade as the template.
Both companies migrated their installed bases from on-premises software to cloud subscriptions, thereby multiplying their recurring revenue several times over.
OpenText is running the same playbook now.
- The company has roughly US$2 billion in annual maintenance revenue tied to legacy on-premises contracts.
- Jenkins estimates that migrating even 10% of that each year and converting it to cloud contracts at a two- to four-times premium would add hundreds of millions in incremental annual recurring revenue.
- At a three-times conversion multiple, that math produces roughly US$400 million in new cloud revenue for every US$200 million of maintenance that rolls off. On a $4 billion revenue base, that is a built-in growth engine.
The driver pushing customers to act is artificial intelligence.
Enterprises cannot train agentic AI systems on data that lives on old file servers or archival tapes. They need that content to be live, accessible, and properly permissioned in the cloud.
OpenText, with over 1,500 content connectors and 25 years of experience managing regulated enterprise data, is the company they call to make that happen.
As Jenkins put it at the conference, “Everything that I just mentioned, you have to have all your content ready to go before you start training those bots.”
A focus on margin improvement
There is one more reason to feel good about owning OpenText today. Management has committed to divesting all non-core businesses by the end of calendar 2026, and proceeds are directed toward debt reduction.
What remains after that cleanup will be a leaner, more focused business built around the content cloud.
Margins are expected to improve in dollar terms even as the revenue mix shifts. Jenkins noted internally that they are already seeing roles in which five positions have been consolidated into one through AI-powered automation.
Analysts forecast OpenText to expand its adjusted earnings per share from US$3.82 in fiscal 2025 (ended in June) to US$5.52 in fiscal 2028. If the TSX tech stock is priced at 10 times forward earnings, it could more than double over the next 18 months.
