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International stocks now yield about twice as much as U.S. domestic stocks, says S&P’s international equity strategist Alec Young, and should be in high demand during 2011 as investors weigh the effects of fiscal austerity programs in Europe such as the one recently announced in the United Kingdom and tighter monetary policy in China and other emerging markets.One asset class that Standard & Poor’s Equity Research believes offers both attractive yields as well as potential for further growth is international dividend stocks.

“The fundamental outlook for international stocks is generally positive,” Young says, adding “yield is going to be a key part of total return.”

As of late 2010, there are about two dozen exchange traded funds (ETFs) focused on international dividend-paying companies, each with its own characteristics. They offer exposure to markets on a global, international (ex-U.S.), or regional basis, including some divided by market capitalization as well. New-York-based WisdomTree is the most prolific issuer of international dividend ETFs, with 13.

It is worth remembering that dividend ETFs, both foreign and domestic, are structured slightly differently than most other equity ETFs.

Rather than being weighted according to market cap, international dividend ETFs track indices that are weighted according to either their yield or the cash actually paid in dividends.

Several of these ETFs also screen for qualities such as dividend growth or consistency. These ETFs may have higher portfolio turnover than those tracking more static indices.

With so many choices available, Young recommends ETFs invested primarily in equities based in developed markets including Europe, Canada, and Australia.

“You’re going to get a smoother ride,” he said, with these ETFs than with funds invested in emerging markets.

One fund Young likes is State Street’s SPDR S&P International Dividend ETF, which launched in February, 2008 and has about $327 million in assets. The fund had a yield of 3.97% as of November 23, according to State Street. It aims to replicate the performance of the 100 highest-yield stocks traded on the world’s major exchanges.

On a sector basis, the fund owns mostly industrials companies, which represented about 26% of assets, followed by financials, with 22%. On a country basis, its largest holding was Spain, at about 19%, followed by France (11%), and Australia (10%).

The Guggenheim S&P Global Dividend Opportunities Index ETF and the Wisdomtree DEFA Equity Income Fund are similar in nature.

Several ETFs go a step further to incorporate one or more “quality” screens.

The iShares Dow Jones International Select Dividend Fund launched in June, 2007, for example, requires the companies to have paid dividends in each of the past three years, must have a current dividend-per-share ratio greater than its three year average, and an above average five year dividend payout ratio for its country.

Its 12-month yield as of October 29 was 4.35%, according to iShares. About 23% of the ETF is invested in Australia and another 13.5% in the United Kingdom. Financials are the largest sector weighting, accounting for about 19% of the ETF’s assets, followed by industrials at 15%.

Other ETFs, such as the First Trust STOXX European Select Dividend Index Fund, require dividend growth.

For those who want to be more aggressive in their pursuit of yield, there is the Guggenheim International Multi-Asset Income ETF, affectionately known as “the International Yield Hog.”

The ETF tracks the Zacks Multi-Asset Income Index, which takes as its objective “to outperform passive dividend benchmarks using a proprietary model based on dividend growth, the capacity to increase the current dividend, liquidity, and dividend yield.”

Like its domestic sister ETF, the International Yield Hog pursues yield across asset classes, including global real estate investment trusts, master limited partnerships, Canadian royalty trusts, and emerging market stocks.

As of September 30, 2010, it owned 147 different securities, according to company data, with about 18% invested in financials, and 16% in energy and telecom stocks. While it can invest up to 60% of its assets in U.S. securities, its largest geographical allocation was the United Kingdom at 16%, followed by Canada at 9% and France at 8%. As of November 23, it had a yield of 3.83%, according to Lipper data.

Just one international dividend ETF has a “Market Overweight” recommendation from S&P: the WisdomTree Japan Small Cap Dividend Fund.

While the fund has a yield of just 1.64%, high scores on S&P’s Fair Value, Technical, and Standard Deviation assessments lead to the Overweight ranking. The fund has about $119 million in assets invested in mostly industrial (25%) and consumer discretionary (23%) stocks.