With interest rates still at unbearably low levels and the Fed mulling a second round of quantitative easing, those investors searching for income have had to take on additional risk. Exchange-traded funds (ETFs) such as the SPDR Barclays Capital High Yield Bond (NYSE:JNK), which bets on junk bonds, have become extremely popular with investors. However, for investors wanting higher dividend yields, they may not need to take on that much more risk to get those payouts.

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Break Out the Passport
Investors looking for higher dividend yields may want to turn their attention overseas as international stocks offer some of the best dividend values. Foreign firms have traditionally held a more dividend-friendly culture, paying them to shareholders rather than keeping them as retained earnings. This is evident in the higher yields of international firms. The S&P 500 SPDRs (NYSE:SPY) was recently yielding 1.91%, versus the iShares MSCI EAFE (NYSE:EFA) which is yielding 2.46%.

While the greenback has been on a tear lately, the expected long-term decline in the dollar is another reason why investors may want international dividends in their portfolio. As these dividends are paid in euros, loonies, krona and yen, and then translated into dollars, investors can receive a higher payout as the dollar falls. This allows investors to enter into a quasi "currency arbitrage" transaction. By selecting stocks of nations that have good long-term prospects, such as Canada, and are appreciating versus the greenback, investors can increase their dividends over the longer term.

Think Outside the Country
Finally, with the planet becoming ever more connected, investors can be missing out general growth of the world's economy by focusing on just domestic firms. After all, you're just as likely to find Dutch firm
Unilever's (NYSE:UL) products in your pantry or a Honda (NYSE:HMC) in your driveway. This growing interconnectivity among economies means opportunities for income investors.

Taking Flight
Investors have plenty of choice for adding a helping of international dividends to their portfolios. ETFs such as the SPDR S&P International Dividend (NYSE:DWX) and the WisdomTree Emerging Markets Equity Income (NYSE:DEM) are good places to start an international dividend search. By looking at their holdings, we can find stocks that provide good dividend yields. Here are a few picks.

England's National Grid (NYSE:NGG) is an example of the robust dividend yields available overseas. The utility is currently yielding 7.8%. Owning operations across the United Kingdom, France and the United States, National Grid has a wide swath of businesses to help with its cash flow. In addition, the company has begun moving into renewable energy as it's one of the major partners in the offshore Cape May Wind Project. Shares of NGG trade at a cheap P/E of 10.

Regional airline GOL Linhas Aereas (NYSE:GOL) is a way for investors to play Brazil's growing middle class. Air travel in Latin America is on the rise and will continue to grow as more people are able to afford to do so. Over the short term, low relative fuel costs and a strong Brazilian real have benefited the company. Shares of GOL yield 9.2%.

Both Australia and New Zealand have been riding high as demand for both of their natural resources and farm products from neighboring emerging Asia. Their currencies have appreciated quite nicely against the dollar and should continue to do so as the world continues to place high demand on their resources. Telecom Corp. of New Zealand (NYSE:NZT), the dominate telecom on New Zealand currently pays a strong 9.1% dividend.

Bottom Line
With the long-term trend of a depreciating dollar and interest rates huddling around zero, investors should take a look at adding international dividends to a portfolio. The previously mentioned stocks or an ETF such as the iShares Dow Jones International Select Dividend Index (NYSE:IDV) make ideal ways to add them to a portfolio. (For more stock analysis, see Top Canadian Dividend Stocks.)

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Tickers in this Article: JNK, SPY, EFA, UL, HMC, DEM, DWX

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