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I realised that an ETF, iShares Currency Hedged MSCI Japan ETF (ticker symbol HEWJ) suddenly paid ~33% dividend on 2 Dec 2022. I couldn’t find any news related to it, and its counterpart (unhedged version, EWJ) does not pay such large amount. Is there any legitimate reason in general that an ETF pays such dividend?

I consider it detrimental to the ETF holders since as a foreigner, 30% of the dividend goes to tax.

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Looking on iShares' page for that fund (click "View full table" under distributions), the distribution was mostly a distribution of short-term and long-term capital gains, not dividends, and would probably be taxed as such.

The good news for that is that the value of the fund goes down by the same amount of the distribution, so when you do sell, your capital gains will be reduced similarly. So it just accelerates whatever capital gains tax you would have owed eventually.

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  • After looking at the table, I started thinking whether the fund sold some holdings. Sadly, in the place I live, there’s no capital gain tax, and the 30% “dividend tax” has been deducted at broker level (so as a foreigner I only receive 70% of the payout).
    – tonychow1997
    Dec 6, 2022 at 16:15
  • But does your country treat all disbursements as "dividends"? They may have withheld 30% automatically but if it's not really a dividend (and you don't have to pay tax on it) you might be able to get it back when you file. Talk to a tax pro in your area and see if they have more specific advice.
    – D Stanley
    Dec 6, 2022 at 16:18
  • Thanks for the advice. The government does not collect any tax related to stocks, so I guess the 30% has been gone. I actually only own 2 shares, so it’s not particularly important in this case, but I will be more careful about my ETF holdings in future, since I often expect an ETF to track an index and pay according to the components’ payout (and this concept is pretty wrong now).
    – tonychow1997
    Dec 6, 2022 at 16:30

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