ASX exchange-traded funds (ETFs) are popular for many reasons, including easy exposure to international shares via our local exchange.
US stocks are particularly popular given that the S&P 500 Index (SP: INX) has outperformed the S&P/ASX 200 Index (ASX: XJO) for several years.
Currency-hedging can reduce or amplify the returns for investors, and we are seeing this play out right now.
It's dividend season, and a closer look shows distributions from some hedged ETFs are more than triple their unhedged counterparts. Woah.
This largely has to do with changes to the US currency.
Since early CY25, the US dollar has been weakening against a strengthening Aussie currency.
The Aussie dollar rose from about 62 US cents in January 2025 to a four-year high of 74 US cents in May this year.
This has helped turbocharge distributions for some currency-hedged ETFs this season.
The US dollar has been weakening amid expectations of interest rate cuts, concerns about the economic impact of fiscal policy, and broader geopolitical and trade uncertainty.
Meanwhile, the AUD is stronger as the outlook for interest rates improves, and rising commodity prices support our terms of trade.
Strong demand for our metals and minerals, driven by the green energy transition and the build-out of artificial intelligence (AI), also supports our currency, as foreign buyers typically pay for exports in Australian dollars.
Let's take a look at some examples of the hedging impact on ASX ETF distributions this season.
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ASX ETF distributions: Hedged vs. non-hedged
The unhedged VanEck Morningstar Wide Moat ETF (ASX: MOAT) will pay $11.61 per unit this season. (By the way, MOAT is one of six ETFs paying a 10% dividend yield in a single payment this season.)
Its currency-hedged counterpart, VanEck Morningstar Wide Moat (AUD Hedged) ETF (ASX: MHOT), will pay $20.54 per unit. That's a 75% higher distribution than MOAT.
The iShares S&P 500 ETF (ASX: IVV), the market's largest ETF tracking the S&P 500 Index (SP: .INX), is paying a distribution of 23.3 cents per unit this season.
The currency-hedged version of IVV, iShares S&P 500 (AUD Hedged) ETF (ASX: IHVV), will pay more than 10x that amount — 270.27 cents per unit.
The Betashares Nasdaq 100 ETF (ASX: NDQ) will pay 90 cents per unit this season.
The hedged version of this ETF, Betashares Nasdaq 100 Currency Hedged ETF (ASX: HNDQ), will pay 30% more at 120 cents per unit.
iShares Global 100 ETF (ASX: IOO), which tracks the S&P Global 100 (Net) Index and is made up of 79% US stocks, is paying out 182 cents per unit this season.
The iShares Global 100 (Currency-hedged) ETF (ASX: IHOO) will pay investors 1,082 cents per unit, or almost 6x the IOO ETF.
Global X S&P World ex Australia GARP ETF (ASX: GARP) will pay 70.76 cents per unit this season.
Global X S&P World ex Australia GARP (Currency Hedged) ETF (ASX: GHRP) will pay almost 4x that amount at 269.5 cents per unit.
Vanguard MSCI Index International Shares ETF (ASX: VGS), which invests in 1,500 stocks in developed nations outside Australia, and has a 77% US exposure, will pay 81.54 cents per unit.
Its currency-hedged counterpart, Vanguard MSCI Index International Shares (Hedged) ETF (ASX: VGAD), will pay more than triple that amount at 293.5 cents per unit.
Final distributions confirmed
ETF providers have confirmed their final distribution amounts for this season.
If you own Vanguard ETFs, see this season's final distributions here.
Interested in VanEck ETFs? View final distributions here.
If you own Betashares ETFs, see final distributions here.
If you're invested in iShares ETFs, see final distributions here.
Invested in Global X ETFs? Find out final distributions here.
