Much has been publicized about adding emerging-market and, for that matter, general international exposure to one's portfolio. After all, places like China, Brazil and Poland are all seeing high single- to low double-digit economic expansion in the near future. Exploding populations, higher incomes/discretionary spending and government prosperity programs are all hallmarks of the emerging market thesis. But after a banner year in 2009, the broad proxy for the market, the iShares MSCI Emerging Markets Index (NYSE: EEM) is struggling in 2010 and at one point sank nearly 7%. Individual emerging markets are fairing even worse. China (NYSE: FXI) was down 12% and Brazil (NYSE: EWZ) was down 16%.

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Even with these downturns investors still need a dose of emerging markets in their portfolios. However, with recent events such as the Greece and Dubai debt problems fresh in many minds, risk control is taking first priority. But within a certain sector of the stock market, investors can find outsized dividends and a way to tap into all of that growing consumer demand.

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Answering the Call
Telecommunications companies may just be what the global investor needs to hedge against risk. The nations with the fastest growing rates have all come from the developing world. Communication providers in these emerging markets are now tapping into the vast rural market places and are a direct play on an exploding demand. For example, in Africa, mobile phone penetration has skyrocketed. Just one in 50 people in 2000 had access to a mobile phone; today that number is closer to 28% of the continent's total population.

While emerging markets and dividends don't generally go hand in hand, for the telecoms it's a necessity. As a capital-intensive industry, one of the best ways to insure that investors will be there when you need to raise money is by offering dividends. The steady (by emerging market standards) free cash flows generated from their growing populations help pay for these distributions. Dividends can help cushion a portfolio in downturns, which in volatile emerging market settings, will occur. There is a closed-end fund that invests in this area. But, investors may want to skip the Emerging Markets Telecommunications Fund (NYSE: ETF) and invest in some of its individual holdings. Here are some of the strongest international telecoms with high dividend yields.

Jumping in Jakarta
Global investors are constantly looking for the "next" China and with the world's fourth largest population Indonesia is beginning to get a lot of attention. With its economy expected to grow about 5.2% in 2010, tapping into Indonesia may be portfolio gold. Servicing those 230 million potential customers is Telkom Indonesia (NYSE: TLK) as the most dominant telecommunication company in the nation. Controlling virtually all the fixed line assets and about 45% of the faster growing wireless market in the nation, Telkom stands to benefit from the continued growth of Indonesia's burgeoning middle class. Investors stand to benefit as well with the stocks 3.5% dividend yield.


The High-Tech Middle East
Without the abundance of petro-dollars, that many of its Middle East neighbors are blessed with, Israel has been forced to focus on other ways of growing its economy. The country turned to highly educating its population and becoming one of the world's technology leaders. A high-tech economy leads to lots of smartphones, and Partner Communications (NASDAQ: PTNR) is the leading wireless provider in the country. With one of the highest average revenue per user (ARPU) rates and lowest subscriber churns in the entire worldwide sector, Partner should be a holding in almost any international portfolio. Combined with a forward P/E of less than three and a 7.2% dividend yield and you have a recipe for portfolio success.

Emerging Europe
While there is still uncertainty pertaining to Greece and its debt problems, there are also opportunities as well. Many of its companies' stocks have been punished, even though they have little or nothing to do with the national debt. As the leading phone company, Hellenic Telecommunications Organization SA (NYSE: OTE) is well insulated from the national problems. Aside from providing phone service in Greece, OTE also lends its services to emerging Albania, Bulgaria and Romania. Shares yield 7.4% and offer upside no matter the resolution to Greece's problems.

Bottom Line
Everyone needs a dose of emerging market stocks in their portfolios. However, many analysts suggest that these markets and their recent rallies are getting long in the tooth. Investors wanting to hedge their emerging market portfolios should take a look at telecommunications providers in these nations. They offer high dividends and a way to tap into growing demand. The previous three stocks as well as others such as Turkcell (NYSE: TKC) and its 5.1% dividend, make excellent choices. (To learn about some issues that may complicate dividends for investors, see Dividend Facts You May Not Know.)

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