The search for higher yields is leading some investors to check out dividend-paying foreign stocks. Over the weekend, the Wall Street Journal highlighted the various ways that investors are venturing overseas to snap up higher dividends than are available from U.S. stocks. The math is simple: "Foreign stocks have much more attractive yields these days. A leading index of big-cap stocks in developed overseas markets yielded a 3.7% payout as of July 31, compared with a 2.4% rate for similar U.S. stocks." The attached graphic makes this clear: dividend yields on foreign stocks have been outpacing dividend yields on S&P 500 stocks for several years now.

Yet, as the article points out, there are extra risks in investing in foreign stocks - like currency risk - for which many investors are unprepared.

What do you think: Are high-yielding foreign stocks more or less risky than high-yielding U.S. stocks?

NOTE: Please keep in mind that TradeKing does not specifically endorse any of the securities or trading strategies mentioned. Depending on your risk-reward profile, this trade may or may not be suitable for your portfolio. The stocks mentioned are for educational purposes only.

[chart: Dividend Play via the Wall Street Journal]

There is nothing so underrated as a good dividend.  The following are stocks that I hold or have held over the 30 years.  Risk is always in the eye of the beholder.  To me, foreign stocks are not intrinsically more risky, you just have to go further to get information in many cases.

FAX (a bond fund of Australian and other far east bonds)

NRT (German gas royalty trust)

PDS (Canadian driller)

UPMKY (Scandanavian paper produducer)

SSW (Asian shipping) 

I think having exposure to foreign dividend-paying stocks is actually LESS risky that having an entire portfolio in US stocks.  Just look what happened to the US dollar, which is probably a large reason why the chart looks as it does.

One caveat though, is that the payout of dividends of most foreign companies are  inconsistent.  They don't seem to be as tethered to the idea of quarterly payments for roughly the same amounts as do US companies.

http://www.fool.com/investing/dividends-income/2008/01/28/the-worlds-best-dividend-stocks.aspx 

Agreed, finding information on foreign dividend-paying stocks is not always easy. That's part of the reason why the new dividend-themed ETF offerings are so tempting for many yield-chasing investors. Instead of picking individual names, you get a basket of names.

- The TradeKing Blog