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The Best Canadian Dividend Stocks to Buy: REITS Canada and other Top Canadian Dividend Stocks.

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Topic: Dividend Stocks

CGI Group Inc. $19 – Toronto symbol GIB.A

CGI GROUP INC. $19 (Toronto symbol GIB.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 260.7 million; Market cap: $5.0 billion; Price-to-sales ratio: 1.1; No dividends paid; TSINetwork Rating: Extra Risk; www.cgi.com) was our “#1 Stock of the Year” for 2010 and 2011.

The company is Canada’s largest provider of computer-outsourcing services. CGI’s services can automate routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses.

CGI’s earnings jumped 19.9% in its 2011 fiscal year, which ended September 30, 2011, to $435.1 million from $362.8 million a year earlier. CGI spent $305.0 million on share buybacks in fiscal 2011. Due to fewer shares outstanding, earnings per share rose 27.4%, to $1.58 from $1.24. Revenue rose 15.8%, to $4.3 billion from $3.7 billion. If you exclude the negative impact of exchange rates, revenue would have risen 18.9%.

CGI is riskier than CP. It does not pay a dividend, and often uses acquisitions to expand. As well, CGI now gets 40% its revenue from government clients, and ongoing budget pressures could delay the awarding of new contracts.

Even so, we feel CGI still has strong long-term growth prospects. Moreover, the stock trades at just 11.3 times the $1.68 a share that CGI will probably earn in fiscal 2012.

CGI Group is still a buy.

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