Like many U.S. investors, I tend to focus my stock-searching time and energy on domestic companies. But it might be time to re-focus and take a look Down Under. Australia's market is quite similar to the U.S. market. It offers low currency risk and a stable economic environment, and it also happens to be home to a handful of dividend payers with yields of more than 4%.

The task is the same whether I'm looking at domestic firms or Australian companies: separating the true values from the companies with dividend coverage problems or declining businesses. With that in mind, let's dig into five Australian contestants.

Telecom and packaging
Like many foreign telecoms, Telstra (NYSE:TLS) offers a meaty dividend yield, but limited prospects for growth. And like Income Investor selection Telecom Corp of New Zealand (NYSE:NZT), Telstra is operating in an unfavorable regulatory environment. However, Telstra's environment is a bit more difficult, and the company's current 8% yield may ultimately be in danger if results come in below the company's current forecast -- which is a real possibility. For that reason alone, I'd pass on Telstra.

Packaging and paper company Amcor (NASDAQ:AMCR) is an interesting prospect. It carries a fair amount of debt, but overall the balance sheet is healthy, and the company's interest coverage ratio (earnings before interest and taxes divided by interest expense) continues to exceed 3 times as of last year. Unfortunately, the company is having problems covering its dividend with free cash flow, which it has failed to do since fiscal 2004. This isn't entirely unusual for a cyclical company, but for now, I'm inclined to look elsewhere.

Banking
U.S. banks with yields higher than 4% -- such as Citigroup (NYSE:C) -- get plenty of attention, but I think this trio of Australian banks deserves a look as well. Australia & New Zealand Banking Group (NYSE:ANZ), Westpac Banking (NYSE:WBK), and National Australia Bank (NYSE:NAB) come in with yields of 4.2%, 5.0%, and 4.6%, respectively. The largest of the three -- National Australia Bank -- carries a market cap of slightly more than $43 billion. The tables below break out some of the important financial details for each bank.

Australia & New Zealand Banking

Metric

TTM

2005

2004

2003

Return on Equity (ROE)

18.2%

17%

17.6%

18.9%

Return on Assets (ROA)

1.1%

1.1%

1.2%

1.3%

Interest Income Growth

12.6%

10.4%

21.9%

7.3%

Earnings Growth

16.2%

13.8%

17.1%

13.5%

Payout Ratio

54.6%

57%

56%

55.5%

Net Interest Margin %

n/a

2.4%

2.5%

2.7%
Data provided by Capital IQ, a division of S&P.

Westpac Banking

Metric

TTM

2005

2004

2003

ROE

22%

21.8%

23.4%

18.3%

ROA

1.1%

1.1%

1.2%

1%

Interest Income Growth

11.6%

10.3%

9.9%

2.9%

Earnings Growth

6.1%

1.5%

39.7%

(23.1%)

Payout Ratio

53.2%

50.9%

49.1%

52.3%

Net Interest Margin %

n/a

2.5%

2.5%

2.6%
Data provided by Capital IQ, a division of S&P.

National Australia Bank

Metric

TTM

2005

2004

2003

ROE

11.7%

14.5%

11.1%

15.4%

ROA

0.7%

0.9%

0.7%

0.9%

Interest Income Growth

10.2%

(1.5%)

(3.1%)

2.7%

Earnings Growth

(6.8%)

40.5%

(24.2%)

6.1%

Payout Ratio

80.9%

62.8%

71.1%

64.4%

Net Interest Margin %

n/a

2.2%

2.4%

2.5%
Data provided by Capital IQ, a division of S&P.

The consistency and better performance at Westpac Banking and Australia & New Zealand Banking stand out. What also stands out is the declining net interest margin that all of the banks are experiencing, and it's something U.S. banks have been struggling with as well. Recently the trend has continued, as rates in Australia were raised in May. In fact, Westpac reported a net interest margin of 2.42% over the past six months. It appears, however, that Australian rates -- like U.S. rates -- are likely to remain stable in the near term.

Foolish final thoughts
I have yet to perform a detailed valuation on any of these Australian banks, but I am most curious about Westpac and Australia & New Zealand, and I believe both have some long-term potential. The concern with picking up an Australian bank is the country's heavy reliance on natural resources and other commodities. Like the United States, Australia is battling inflation, and high oil prices are putting a dent in the country's growth. And a slowing economic environment is just tough for everyone. That said, healthy financials and yields over 4% -- and in the case of Westpac, 5% -- are good places to start looking for investment ideas.

To learn more about dividend-paying stocks, including a number of banks, take a free, 30-day trial to Motley Fool Income Investor. Focusing on dividend-paying companies has the service beating the market by more than five percentage points. Click here to learn more.

At the time of publication, Nathan Parmelee had no financial interest in any of the companies mentioned. The Motley Fool has a disclosure policy.