TD Active U.S. Enhanced Dividend ETF (TUED): A Steady Income Play in Volatile Markets

The TD Active U.S. Enhanced Dividend ETF (TUED) has emerged as a compelling income-generating option for Canadian investors, recently declaring a CAD $0.078 dividend—a 44% surge from early 2024 levels. This move underscores the ETF's strategic appeal in an era of market volatility and evolving U.S. equity dynamics. Let's dissect why TUED merits attention, particularly for those prioritizing consistent payouts and currency-smart investing.

Dividend Growth: A Resilient Track Record

TUED's dividend trajectory is a standout feature. Since its 2020 inception, the ETF has delivered steady increases, with a 17.99% average annual growth rate over the past three years. Key milestones include:
- 2021: A 15.8% jump to $0.044 CAD.
- 2022: Another 15.9% rise to $0.051 CAD.
- 2025: A dramatic 44% leap to $0.078 CAD in March, marking its highest payout since launch.

This consistency is critical for income investors. Even in 2024—a year of market turbulence—TUED maintained its $0.054 CAD dividend through October before the March 2025 surge. Such resilience suggests robust portfolio management, which we'll explore further.

CAD vs. USD Share Classes: Navigating Currency Exposure

TUED offers two share classes: the CAD-hedged TUED.TO and the USD-denominated TUED-U.TO. The choice hinges on your currency outlook:

CAD-Hedged (TUED.TO): Stability for Canadian Investors

• Pros:
• Shields against USD strength, which has surged against CAD to ~1.40 in 2024.
• Payouts are converted to CAD, reducing exchange rate risk.
• Ideal for investors who want to avoid volatility tied to the USD/CAD pair.
• Cons:
• May underperform if the USD weakens sharply.

USD Share Class (TUED-U.TO): For Bulls on U.S. Equities

• Pros:
• Direct exposure to U.S. dollar-denominated returns.
• Better if you believe the USD will maintain its dominance (e.g., due to Fed rate hikes).
• Cons:
• CAD investors face currency risk; a stronger CAD could dilute returns.

Given current forecasts predicting a USD/CAD range of 1.30–1.45 in 2025, the CAD-hedged TUED.TO likely remains the safer pick for most Canadian investors seeking steady income without currency speculation.

Active Management: A Shield Against Volatility

While many dividend ETFs passively track indices like the S&P 500, TUED employs active management to navigate markets dynamically. This approach is critical in today's environment:

1. Sector Diversification:
2. Avoids overexposure to rate-sensitive sectors (e.g., real estate).

3. Focuses on stable dividend payers in utilities, healthcare, and consumer staples.

4. Risk Mitigation:

5. The fund's 0.28% MER is low, ensuring minimal erosion of dividend payouts.

6. Active rebalancing allows managers to rotate into undervalued stocks or cut ties with underperformers.

7. Resilience in Downturns:

8. During the 2022 market selloff, TUED's dividend remained stable, unlike some passive peers that cut payouts.

Why TUED Stands Out in 2025

1. U.S. Equity Outlook:

2. Despite Fed rate cuts expected in 2025, dividend-paying stocks (especially in defensive sectors) are poised to outperform growth-oriented peers.

3. Currency Tailwinds (or Headwinds):

4. With the BoC likely to keep rates lower than the Fed, CAD weakness could persist. TUED's hedged structure mitigates this risk.

5. Sustainable Payouts:

6. The fund's March 2025 dividend hike signals confidence in its portfolio's health, even amid macroeconomic uncertainty.

Investment Takeaways

• For Income Investors: TUED's 3.59% forward yield (as of April 2025) makes it a top-tier option for Canadian portfolios. Pair it with fixed-income holdings for balanced growth.
• Currency Strategy: Stick with TUED.TO unless you're betting on a sharp CAD rebound.
• Active vs. Passive: The ETF's outperformance in volatile periods justifies its active mandate.

Final Verdict: TUED is a solid pick for Canadians seeking reliable dividends with minimal currency risk. Monitor the USD/CAD pair and TUED's payout trends, but for now, this ETF offers a stable anchor in a choppy market.

Disclaimer: Past performance does not guarantee future results. Always review fund documents and consider your risk tolerance before investing.