Computer Modelling Group Ltd. (TSX:CMG) is not your ordinary tech stock.
For one, the company has a large base of customers in the oil and gas industry and can benefit from rising oil prices. The vast majority of the company’s sales come from software licenses, a lot of which are recurring and provide Computer Modelling with a lot of stability from one year to the next. Companies use the software to run simulations, do sensitivity analysis, and many other computations that can help oil and gas companies optimize their operations.
Computer Modelling also pays investors a yield of more than 4.1% annually. You don’t typically see tech stocks offer payouts, and that’s where Computer Modelling provides yet another exception to the norm. The company has also increased its payouts, with the last time being in 2014. However, if we see more of a recovery in the oil and gas industry that could certainly change.
Not only does Computer Modelling offer investors a very good 4% dividend, but it also provides the opportunity to benefit from a recovering oil and gas industry without being directly exposed to the risks. Rather than investing in Enbridge Inc (TSX:ENB)(NYSE:ENB) or Cenovus Energy Inc (TSX:CVE)(NYSE:CVE), which could expose investors to considerable risk, Computer Modelling is a safer way to bet on the price of oil without the fear of imminent disaster if the commodity price collapses yet again.
As a software provider, Computer Modelling has skills and expertise that can easily be transferable to other industries and serve other customers. The same cannot be said for oil and gas companies.