TD Q Global Multifactor ETF's Dividend Cut: A Mixed Signal for Income Investors

The TD Q Global Multifactor ETF (TQGM.TO) recently declared a quarterly dividend of CAD 0.08 per unit for Q2 2025—a sharp decline from its previous CAD 0.1050 payout. While this cut may raise eyebrows, the broader context of shifting market conditions and the ETF's multifactor strategy demand closer scrutiny. For income-focused investors, this decision presents both challenges and opportunities worth evaluating.

The Dividend Decline: A Reality Check

First, let's clarify the numbers. Contrary to rumors of a CAD 0.80 dividend, the ETF's Q2 payout is CAD 0.08—marking a 23.8% drop from the prior quarter. This reduction follows three years of relative stability, during which dividends hovered around CAD 0.1050 (see Figure 1 below). The forward dividend yield now sits at 1.57%, down from its historical average of 2.1% in recent years.

Figure 1: The ETF's dividend per unit has fluctuated, with the Q2 2025 cut marking its lowest payout since late 2021.

Why the Cut? A Market-Driven Adjustment

The dividend reduction likely reflects broader headwinds facing global equity income strategies. Key factors include:
1. Interest Rate Pressures: Central banks' prolonged rate hikes have squeezed corporate profit margins, particularly in sectors like energy, financials, and utilities—key components of the ETF's holdings.
2. Economic Uncertainty: Slowing global growth and geopolitical risks (e.g., China-U.S. trade tensions, European energy costs) have dampened dividend payouts from multinational firms.
3. Portfolio Rebalancing: As a multifactor ETF, TQGM.TO prioritizes quality, value, and momentum. A shift toward growth-oriented stocks (which often reinvest earnings rather than pay dividends) could reduce distributable income.

Is the ETF Still Worth Holding for Income Investors?

While the dividend cut is disappointing, the ETF retains several strengths:

1. Diversification Power

The ETF tracks the MSCI ACWI Index, offering exposure to over 2,000 global equities across 23 countries. This broad diversification buffers against sector-specific downturns, making it a lower-risk income play compared to single-country or sector-focused ETFs.

2. Multifactor Discipline

Its factor-based strategy—favoring companies with strong earnings, low volatility, and strong momentum—has historically outperformed pure market-cap-weighted funds. For instance, during the 2022-2023 bear market, TQGM.TO's drawdown was 20% shallower than the S&P 500.

3. A Steady, If Modest, Income Stream

Even at 1.57%, the forward yield outperforms many Canadian bond ETFs (e.g., the iShares Canadian Universe Bond ETF (XBB.TO) yields ~2.3% but carries interest rate risk). For income investors willing to accept equity volatility, TQGM.TO's global reach and factor tilt could complement fixed-income holdings.

Investment Considerations

• Cost Awareness: The ETF's Management Expense Ratio (MER) is 0.25%, reasonable for a global equity fund but still eating into returns in low-yield environments.
• Tax Efficiency: As an ETF, TQGM.TO avoids the double taxation of mutual funds, making it more tax-efficient for Canadian investors.
• Risk Tolerance: Equity income investments are inherently riskier than bonds. The ETF's beta of 0.95 suggests it's slightly less volatile than the global market, but drawdowns are inevitable during corrections.

A Prudent Approach for Income Seekers

For income-focused investors, TQGM.TO remains a viable option—if paired with a disciplined strategy:
1. Dollar-Cost Average: Use periodic contributions to smooth out dividend volatility.
2. Pair with Defensive Assets: Combine the ETF with high-quality bonds (e.g., iShares Core Canadian Universe Bond ETF) or dividend-paying REITs for stability.
3. Monitor Factor Performance: Track whether the ETF's value and quality factors are regaining momentum. A rebound in these metrics could presage higher dividends.

Final Verdict

The CAD 0.08 dividend is a wake-up call that global equity income isn't risk-free. Yet, for investors prioritizing diversification and factor-driven resilience, TQGM.TO still holds merit—provided they temper expectations and pair it with other income streams. In a world of 5% bond yields and recession risks, a 1.57% yield with global growth exposure isn't bad for a portfolio's “swing bat.”

Disclosure: This analysis is for informational purposes only. Investors should consult the ETF's prospectus and consider their risk tolerance before making decisions. Past performance does not guarantee future results.