Global Equity Income in CAD: The Case for Mackenzie's Hedged ETF Amid Volatility

The Mackenzie International Equity Index ETF (CAD-Hedged) (QDXH.TO) has declared a quarterly dividend of CAD 1.54484 per unit, payable on June 30, 2025, to shareholders of record as of June 23. This distribution, which follows a June 2024 dividend of CAD 1.74, underscores the ETF's role as a yield-focused vehicle for Canadian investors seeking exposure to global equities while mitigating currency risk. With its 2.5% trailing dividend yield and explicit CAD hedging, QDXH.TO emerges as a compelling alternative to non-hedged peers like the Mackenzie International Equity Index ETF (QDX.TO), which yields just 0.75%.

Currency Hedging: A Shield Against Volatility

The Canadian dollar's volatility against major currencies like the euro and yen has created significant headwinds for unhedged equity exposures. QDXH.TO's CAD hedging mechanism, which seeks to offset foreign exchange fluctuations, is a critical advantage in this environment. While unhedged ETFs like QDX.TO leave investors exposed to currency swings—potentially eroding returns—QDXH's strategy ensures that gains (or losses) are purely from equity performance. This is particularly relevant as the Bank of Canada's rate-hike cycle continues, increasing demand for stable income streams.

Dividend Trends: Volatile but Consistent?

The ETF's dividend history reveals a pattern of sharp quarterly fluctuations. For instance, its June 2024 payout of CAD 1.74 dropped to CAD 0.6063 by September, before rebounding to CAD 0.9281 in December. Such variability reflects the challenges of tracking an index like the Solactive GBS Developed Markets ex North America Large & Mid Cap CAD Index, which includes sectors such as Financials and Industrials. However, the trailing 12-month yield of 2.5%—versus QDX.TO's 0.75%—suggests QDXH's structure prioritizes income over capital stability.

Investors must weigh this volatility against the ETF's hedging benefits. While QDXH's yield is not guaranteed—dividends depend on the underlying index's performance—the consistency of quarterly distributions (vs. QDX's biannual schedule) offers predictability for income portfolios.

ESG Integration: A Growing Necessity

The ETF's explicit integration of ESG criteria aligns with global investor priorities. Mackenzie's focus on environmental, social, and governance factors—though details remain sparse—signals an effort to mitigate long-term risks tied to climate change and corporate governance failures. This contrasts with QDX.TO, which lacks such emphasis, making QDXH more appealing to socially conscious investors.

Comparison with Non-Hedged Peers: Yield vs. Risk

QDX.TO, the unhedged sibling, offers a stark contrast. Its 0.75% yield reflects both lower dividend payouts (CAD 0.99 annually vs. QDXH's CAD 6.18) and a riskier profile. QDX's biannual distributions, last paid in March 2025, and its history of dividends in only two of the past 10 years highlight its inconsistency. Meanwhile, QDXH's hedging and quarterly payments cater to investors who prioritize stable cash flow.

Technical analysis further underscores the divergence: QDX.TO's “Sell” rating, driven by declining moving averages, suggests near-term underperformance. QDXH, by contrast, benefits from its defensive hedging and income appeal.

Investment Considerations for Canadian Investors

In a rising rate environment, QDXH.TO's 2.5% yield offers a competitive alternative to low-yielding bonds. Its hedging shields investors from CAD depreciation risks, while quarterly dividends provide steady income. However, the ETF's equity-linked volatility means it should be paired with more stable assets in a diversified portfolio.

Conclusion: Hedged Income for Uncertain Markets

QDXH.TO's recent dividend declaration reinforces its position as a yield-driven tool for Canadian investors navigating global uncertainty. While its returns may fluctuate, the combination of hedging, consistent payouts, and ESG alignment makes it a robust choice for income-focused portfolios. Investors seeking steady cash flow without currency exposure should prioritize this ETF over its unhedged counterpart, even as they remain mindful of equity market risks.

Disclosure: ETF distributions are not guaranteed and depend on underlying index performance. Investors should consult their advisors regarding tax implications and currency hedging mechanics.