Dividend ETFs - An Antidote for Volatile Markets

A smoother ride

Dividend ETFs have several characteristics that are attractive to investors looking for a smoother ride. They are generally less volatile because they typically consist of more mature companies with stable cash flows. Most dividend ETFs are passive, meaning they rely on a rules-based index methodology for portfolio construction. These ETFs tend to select the highest-yielding securities within the investment universe for inclusion within the portfolio. They offer instant diversification at a low cost.

However, high yield should not be the only consideration when choosing investments. Taking a more diversified and active approach to selecting a portfolio of dividend-paying stocks can offer some advantages over passively managed products.

The focus of TQCD and TQGD is quality. These solutions invest in companies that have not only paid dividends historically but are likely to sustain and grow their dividends going forward. The Quantitative and Passive Investment Team at TD Asset Management Inc. (TDAM) looks for companies that have consistently been able to pay down their debt and increase profitability, ones that have also exhibited strong cash flows and have liquid balance sheets. This criterion often favours insurance and energy companies, materials, certain real estate trusts, and traditional defensives like staples and utilities. In TQGD, the focus is on high-quality dividend payers in healthcare, transportation, and technology.

How TDAM finds these companies is what truly sets it apart 

The Quantitative and Passive Investment Team, which has been around for 25 years, was one of the first in Canada to focus on quantitative investing, a sophisticated approach to investment management and security selection that uses a combination of computer models, data analytics and professional judgement to create an optimal portfolio that balances risk and return.

This statistical approach has added a new dimension with the advent of artificial intelligence (AI). While quantitative investing has traditionally employed numerical data from financial statements, AI now provides the ability to interpret unstructured or textual data with increased depth.

The Team is virtually unmatched in Canada. With 30 dedicated managers, data specialists, and researchers, and around C$125B¹ assets under management, it is one of the few organizations capable of operating at a scale large enough to maintain a top-level operation running on the highest quality data available.

Both the TD Q Canadian Dividend ETF (TQCD) and the TD Q Global Dividend ETF (TQGD) can be purchased through your discount brokerage accounts or through your advisor.

¹Source: Assets under management across all mandates managed by TDAM. As of June 30, 2024

Commissions, management fees and expenses all may be associated with investments in exchange-traded funds (ETFs). Please read the prospectus and ETF Facts before investing. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. Index returns do not represent ETF returns. The indicated rates of return are the historical total returns for the periods including changes in unit value and reinvestment of all distributions and do not take into account redemption, commission charges or income taxes payable by any unitholder that would have reduced returns.

TD ETFs are managed by TD Asset Management Inc., a wholly-owned subsidiary of The Toronto-Dominion Bank.

TD Asset Management Inc. is a wholly-owned subsidiary of The Toronto-Dominion Bank.

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