Diversification is a key investing concept many financial advisers preach to investors as a way to reduce their risk exposures. Many people interpret this advice to suggest that they should invest in several different stocks across different sectors and industries. This is interpretation is partly correct. However, one area many people tend to overlook is diversifying across different countries.

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Perhaps accentuated by the financial crisis that originated in the U.S., there has been a growing trend for investors to diversify away from the domestic securities. This is evidenced by the slide in U.S. dollar foreign reserve holdings over the last decade. According to the International Monetary Fund (IMF), foreign reserve holdings have decreased from 71% in 1999 down to 62% in 2010. In addition, in the trailing year, the U.S. Dollar Index (DXY) has fallen over 17% from its peak which makes any U.S. dollars you are holding worth that much less. There are many signs that the U.S. dollar may eventually lose its status as a reserve currency, and if that happens, having a well-diversified portfolio will better protect your assets.

With that said, here are seven of the highest dividend-paying stocks that originate in countries outside of the U.S. for investors to consider:

Company Ticker Dividend Yield Country
Frontline Ltd. FRO 8.37% Bermuda
France Telecom FTE 7.46% France
Telefonica, S.A. TEF 7.35% Spain
Banco Santander, S.A. STD 6.58% Spain
Silicon Precision Industries SPIL 6.05% Taiwan
Nokia Corporation NOK 5.91% Finland

Likely the most recognizable name on this list is the world's largest maker of mobile devices. Nokia has a market capitalization of approximately $35 billion and trades at a forward P/E of 12.5 versus its five-year P/E average of 18.5. This might suggest an undervaluation based on this ratio alone. In addition, the company recently abandoned its legacy phone platforms in favor of Microsoft's Windows Phone 7 in an attempt to reinvent itself in the handset market. The scale of Nokia is unmatched in the marketplace, and its technology is among the most cutting-edge in the world, which makes Nokia worthy of consideration. (For more on this topic, see Can Nokia And Microsoft Recapture Their Magic?)

The Bottom Line
Diversification may not give you all the protection you want, but diversifying across countries as well as sectors does provide some safety in the event of negative market developments. In addition, investing in large-cap stocks that also pay a dividend will further spread out the risk of all your assets being affected by a single event.

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