Worries about the slowing global economy and stock valuations have many investors running from the markets recently- especially when it comes to growth and momentum stocks. The tech-heavy PowerShares QQQ (Nasdaq:QQQ) is down heavily from its recent peaks. However, the recent sell-off of stocks has presented some opportunities for investors looking to put money to work.

One of them could international dividend stocks.

Offering cheaper valuations than many of their U.S. peers- along with higher dividend yields- international dividend stocks could be a great buy in today’s current marketplace. For investors, shifting a portion of their portfolio to these stocks couldn’t be easier.

Looking Across The Pond

While funds like the $11 billion Vanguard High Dividend Yield Index ETF (ARCA:VYM) have become popular destinations for investors looking for yield, investors may want to break out their passports. 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. Average payout ratios for international firms are around the 35-45% range. This compares to the average 25% for U.S. stocks. 

That results in higher dividend yields. The international developed market benchmark MSCI EAFE index is currently paying 2.54%. That compares to just 1.86% for the S&P 500. Some nations- like Australia and the United Kingdom- have yields in excess of 4%. 

What’s more is that the EAFE is currently trading for a much lower price-to-earnings ratio than the U.S. only benchmark. That higher dividend yield and “value” has made international dividend payers a powerful total return element for a portfolio. According to Zurich's Credit Suisse (NYSE:CS) that combo has typically resulted in the best returns when looking at gains in 12 countries over the last 22 years. 

Some of those better returns can be attributed to currency gains.

While the greenback has been on a tear lately, the long-term decline in the dollar has helped pad returns. 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. Making a swath of international dividend payers more important than ever.

Picking-up Some International Dividend Flair

Given the potential value to be had in the various international dividend payers, investors may want to tilt their portfolios in that direction. A prime way is through the iShares International Select Dividend ETF (NYSE:IDV).

The ETF tracks 101 different international dividend payers- including Paris-based telecom giant Orange (Nasdaq:ORAN) and Rome's energy titan ENI (NYSE:E). Overall, IDV’s portfolio spans the developed world and includes some exposure to Singapore and Hong Kong. Expenses for the ETF run a cheap 0.50% and yields a hefty 4.76%. The SPDR S&P International Dividend (NYSE:DWX) also offers a broad portfolio of international dividend payers and yields 6.61%. 

Another approach could be focusing on “quality” dividends. Both the DWX and IDV simply weight their portfolios based on yield paid. The new smart beta revolution attempts to circumvent issues with that approach by applying various screens. The FlexShares International Quality Dividend ETF (Nasdaq:IQDF) uses a proprietary scoring model that determines a "quality factor” of the underlying dividend payers. That should help prevent hiccups and cut distributions. It also results in a weighted average dividend yield of 5.38%. Likewise, the brand new Market Vectors MSCI International Quality Dividend ETF (Nasdaq:QDXU) uses similar screens on the popular MSCI ACWI ex USA Index. 

For investors looking for more “spice” from their international dividend portfolio- both small-caps and emerging markets are two areas that are often ignored when it comes to finding dividends. New York-based ETF sponsor WisdomTree (Nasdaq:WETF) offers both the WisdomTree International SmallCap Dividend (NYSE:DLS) and WisdomTree Emerging Markets Equity Income (NYSE:DEM). Both funds can be used to bolster a portfolio and play these two forgotten areas. Expenses run 0.58% and 0.63% respectively. 

The Bottom Line

For investors, the recent market sell-off has created some interesting opportunities. One of the biggest could be those funds that focus on international dividend stocks. Offering high yields and low valuations, the time to pounce on the sector is now. The previous picks- along with the PowerShares International Dividend Achievers ETF (NYSE:PID) –are great ways to add exposure.