Updated 3/11/2025
OpenText Corporation (NASDAQ: OTEX, TSX: OTEX) is a major player in enterprise information management, helping businesses store, analyze, and secure their data. While it may not be the first name that comes to mind for dividend investors, the company has quietly built a reputation for steady payouts.
OpenText’s business revolves around cloud-based solutions that improve workflow automation, cybersecurity, and digital transformation. With a strong track record of acquiring companies to expand its capabilities, OpenText has grown into a software powerhouse. The big question for dividend investors: Is this stock a reliable income source for the long term?
📊 Key Dividend Metrics
💰 Dividend Yield: 4.10% (Higher than historical average)
📈 Dividend Growth: Moderate with room for future increases
🛡️ Payout Ratio: 41.84% (Healthy and sustainable)
📅 Next Dividend Payment: March 21, 2025
📆 Ex-Dividend Date: March 7, 2025
🏛 Dividend History: 10+ years of consistent payments
📊 5-Year Average Dividend Yield: 2.35% (Currently above trend)
Dividend Overview
At a 4.10% yield, OpenText offers a solid income stream, especially for a tech stock. It’s currently paying out $1.05 per share annually, with the next dividend set for March 21, 2025. Compared to its five-year average yield of 2.35%, the stock is offering a much higher return right now, which could be an opportunity or a red flag depending on the company’s outlook.
For those looking to capture the next payout, the ex-dividend date is March 7, 2025—investors must own shares before this date to qualify.
Dividend Growth and Safety
Dividend safety is always a top concern, and OpenText looks strong in this area. Its payout ratio is 41.84%, meaning the company retains most of its earnings for reinvestment while still rewarding shareholders.
While OpenText isn’t known for aggressive dividend hikes, it has maintained steady increases over the years. The company has never cut its dividend, a reassuring sign of management’s commitment to shareholders.
However, growth has been inconsistent. The company prioritizes acquisitions to fuel expansion, which sometimes takes precedence over dividend increases. That being said, the dividend has remained dependable, even as OpenText navigates its evolving business strategy.
Chart Analysis
Overall Trend
The chart for OpenText (OTEX) shows a clear long-term downtrend over the past year. The stock has struggled to gain momentum, consistently making lower highs and lower lows. Both the 50-day and 200-day moving averages are sloping downward, reinforcing the bearish sentiment. The price remains well below both moving averages, which suggests that buyers haven’t stepped in with enough force to reverse the trend.
Moving Averages
The 50-day moving average has been acting as resistance for much of the past several months, with multiple failed attempts to break above it. The 200-day moving average is even higher, showing that the stock remains in an extended bearish phase. The significant gap between these two averages highlights the persistent selling pressure and lack of bullish momentum.
Volume Activity
One of the most striking aspects of the chart is the recent spike in volume. Compared to the relatively low volume seen over the past several months, there was a dramatic increase in trading activity. This could indicate some form of capitulation selling or the beginning of institutional accumulation. However, without confirmation from price action, it’s too early to say whether this volume surge marks the start of a trend reversal.
RSI and Momentum
The relative strength index (RSI) has been in a prolonged downtrend, mirroring the stock’s price action. While it has remained largely in bearish territory, it does not appear to have hit extreme oversold levels recently. The RSI has ticked up slightly, but without a meaningful break above key resistance levels, it doesn’t signal a shift in momentum just yet.
Recent Price Action
The last few trading sessions have seen the stock consolidating near its 52-week lows. While it hasn’t broken down further, there also hasn’t been a strong rebound, which suggests a wait-and-see approach from investors. The most recent candlesticks show some indecision, with small bodies and longer wicks, indicating a battle between buyers and sellers.
Support and Resistance Levels
The stock appears to be testing a key support level near 25.00, an area where it has found some footing in the past. If this level holds, there’s potential for a short-term bounce. However, if it breaks below this zone, the downtrend could accelerate. On the upside, the first major resistance would be the 50-day moving average, followed by the 30.00 level, which previously acted as a support-turned-resistance.
Analyst Ratings
In recent months, OpenText Corporation (OTEX) has seen a variety of analyst assessments, reflecting both optimism and caution regarding the company’s future performance.
Downgrades
- RBC Capital Markets 🏦 On November 1, 2024, RBC Capital Markets downgraded OpenText from “Outperform” to “Sector Perform,” adjusting the price target from 45 to 33. This decision was influenced by concerns over the company’s revenue decline and elevated debt levels, which could impact its financial flexibility and growth prospects.
- National Bank Financial 📉 Similarly, on August 2, 2024, National Bank Financial downgraded OpenText to “Sector Perform” from “Outperform,” maintaining a price target of 38. The downgrade was attributed to the company’s recent earnings report, which showed a decrease in revenue, raising questions about its ability to sustain previous growth rates.
Upgrades
- UBS 📊 On December 17, 2024, UBS initiated coverage on OpenText with a “Neutral” rating and set a price target of 32. This initiation reflects a balanced view, acknowledging the company’s strong market position while expressing reservations about its high debt levels and recent revenue trends.
- Raymond James Ltd. 🔍 On November 29, 2024, Raymond James Ltd. maintained its “Outperform” rating on OpenText, suggesting confidence in the company’s long-term strategy and potential for recovery despite short-term challenges.
Consensus Price Target
📌 As of the latest analyst evaluations, OpenText has an average 12-month price target of approximately 35.18. This consensus reflects a range of projections, with the highest target set at 48.00 and the lowest at 31.00. The average target suggests a potential upside of around 39% from the current trading price, indicating that analysts see room for appreciation, albeit with varying degrees of confidence.
📌 These diverse analyst opinions underscore the importance of considering both the company’s strengths and the challenges it faces. While some analysts express caution due to financial metrics and market conditions, others remain optimistic about OpenText’s strategic initiatives and market position.
Earning Report Summary
OpenText recently shared its latest quarterly earnings, and there’s a mix of good and bad news. The company pulled in $1.335 billion in revenue for the quarter ending December 31, 2024, which is down 13.1% from last year. A big part of this drop was due to the sale of AMC, but even without that, revenue still slipped 4.9%.
Recurring revenue, which includes things like cloud subscriptions and software maintenance, made up about 79% of total revenue, bringing in $1.053 billion. That’s 8.1% lower than the same time last year, though when adjusted for the AMC sale, it’s a much smaller decline of 0.8%. On the bright side, cloud services revenue actually grew by 2.7%, hitting $462 million for the quarter.
One of the biggest highlights was net income, which came in at $230 million, a massive 510.1% increase from last year. That boost pushed the company’s net income margin to 17%, a solid jump. Adjusted EBITDA was strong at $501 million, with a healthy 37.6% margin. Earnings per share (EPS) also looked good, with GAAP-based EPS at $0.87 and non-GAAP EPS at $1.11.
Cash flow was another bright spot, with $348 million in operating cash flow and $307 million in free cash flow. OpenText also continued rewarding shareholders, returning $134 million through dividends and share buybacks—$68 million in dividends and $66 million in stock repurchases.
CEO Mark J. Barrenechea pointed to these results as a sign that OpenText is staying strong, even in a tough environment. He mentioned that the company is focused on growing its competitive edge, expanding margins, and generating cash flow to provide solid returns for investors. He also highlighted Titanium X, a new cloud-based software upgrade set to launch in the fourth quarter, which will integrate cloud, AI, and security solutions.
CFO Madhu Ranganathan also sounded optimistic, emphasizing how well the company managed its margins and operational efficiency this quarter. She said OpenText is in a strong position heading into the second half of the fiscal year and expects these improvements to continue into 2026.
Overall, while revenue is down, OpenText is still finding ways to grow, particularly in cloud services and profitability. Leadership seems confident in their strategy, and the company is pushing forward with new innovations that could drive long-term success.
Financial Health and Stability
A strong balance sheet is essential for maintaining dividends, and OpenText has some strengths, but also some risks.
- Revenue (TTM): $5.41 billion
- Operating Margin: 23.05% (Indicates strong profitability)
- Total Debt: $6.66 billion
- Cash on Hand: $1.12 billion
- Debt/Equity Ratio: 157.48% (On the high side)
The company’s debt levels are elevated, which is something to watch. OpenText has spent aggressively on acquisitions, leading to a debt-to-equity ratio of 157.48%—a number that’s higher than many dividend-focused investors would like to see.
On the other hand, OpenText generates strong cash flow, which helps offset debt concerns:
- Operating Cash Flow (TTM): $840.1 million
- Levered Free Cash Flow (TTM): $2.63 billion
With solid free cash flow, the company can comfortably cover its dividend, despite its debt burden. However, rising interest rates or a slowdown in revenue growth could make things tighter in the future.
Valuation and Stock Performance
Current Stock Price: $25.28
52-Week Range: $24.91 – $40.55
P/E Ratio: 10.44 (Attractive valuation)
Forward P/E: 6.16 (Even more appealing)
Price/Book Ratio: 1.60 (Below industry average)
OpenText’s stock is down significantly from its 52-week high of $40.55, currently trading near its low at $25.28. That’s a 34.66% drop over the past year, which could mean the stock is undervalued or that investors are concerned about its future prospects.
The P/E ratio of 10.44 suggests the stock is trading at a reasonable valuation, and its forward P/E of 6.16 indicates even better value relative to future earnings expectations. However, a year-over-year revenue decline of -13.10% raises some concerns about the company’s growth trajectory.
The beta of 1.17 suggests OpenText’s stock is slightly more volatile than the broader market, which is something income investors may want to keep in mind.
Risks and Considerations
There are a few key risks that dividend investors should consider before buying OpenText:
⚠️ High Debt Load – The debt-to-equity ratio of 157.48% is high for a dividend-paying stock. If borrowing costs rise, it could impact financial flexibility.
⚠️ Revenue Decline – OpenText’s revenue fell 13.10% year-over-year, which is a red flag. If this continues, the company may have to rethink its spending, which could affect dividends in the future.
⚠️ Stock Weakness – The stock is down over 34% from its highs, reflecting investor concerns. While this could be a buying opportunity, it’s also a sign of potential headwinds.
⚠️ Acquisition Strategy – OpenText relies heavily on acquisitions, which can be risky. If a major acquisition doesn’t perform as expected, it could hurt profitability and impact dividend growth.
Final Thoughts
OpenText offers a compelling dividend yield at 4.10%, backed by a reasonable payout ratio of 41.84% and strong free cash flow. For investors looking for a tech stock with a reliable income stream, OpenText is worth considering.
However, its high debt levels and declining revenue are concerns that shouldn’t be ignored. While the stock appears undervalued based on earnings, the market may be pricing in future risks. Investors who prioritize dividend stability should keep an eye on the company’s ability to manage its debt and return to revenue growth in the coming quarters.
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