Through trial and error, you've undoubtedly learned that no stock is perfect. But research proves that dividend payers take half the plunge that non-payers take during bear markets. There's more. High yields, when coupled with a strong underlying business, can provide both excellent growth in bull markets and outstanding downside protection in bear markets. What's not to like, right?

Right. But finding great stocks is the key to a high-yield strategy. So the next logical question is: Where are the best dividend payers found?

Are they consumer goods manufacturers? Oil companies? Transportation firms? All of the above?

Go east, dear Fool
I know what you're thinking: "Transportation firms? Is this guy seriously recommending -- gulp -- General Motors (NYSE:GM) or some other auto manufacturer? Well, is he?"

Not exactly. Instead, I'm saying great businesses that boast high yields can be found in any industry, as long as you broaden your search to overseas markets. That's what I did. It all started when I recently produced a screen for foreign firms whose shares trade as American Depositary Receipts on major U.S. exchanges. (ADRs, as they're called, allow international firms to get exposure to the liquidity of the U.S. markets by making it easy for investors to buy and sell shares.) Here is a list of all the criteria I entered into Capital IQ's screener:

  • All ADRs participating on major U.S. exchanges.
  • A market capitalization in excess of $1 billion.
  • A dividend yield of 3% or better.
  • A payout ratio of 80% or less.
  • A return on equity of 20% or better over the trailing 12 months.
  • A P/E no higher than 17.5, which Capital IQ says is the current multiple for the S&P 500.

Big names, big profits?
The screen returned 16 firms, many of which I'd consider excellent candidates for investment. Here's why: These businesses blend efficiency (high returns on equity) with sustainable high yields (a reasonable payout ratio). And by trading at below-market multiples, they offer investors a reasonable chance of buying on the cheap.

Two of the firms really caught my eye, because they are active recommendations within our newsletter services. First is United Kingdom-based Unilever (NYSE:UL), which was chosen by dividend guru Mathew Emmert in his Motley Fool Income Investor newsletter service. It beat the market by nearly 2% since joining the portfolio a year ago -- and that's before a 4.5% yield.

The second firm is British financier Lloyds TSB (NYSE:LYG), which is a Motley Fool Inside Value recommendation. Since being added to the Inside Value portfolio in 2004, Lloyds has bested the market by a point. But that, too, is before a dividend yield that stands at 6.3% today and is funded entirely through income generated by ongoing operations.

It's advantageous that both Lloyds and Unilever are based in the United Kingdom. The UK is one of more than 50 countries with which the United States has a tax treaty, which allows investors to reclaim all foreign tax paid on dividends, just as if the holdings were U.S. shares. (More is available on page 61 of IRS publication 17, which you can download as a pdf document here.) Bear in mind, however, that this benefit only applies to holdings in taxable accounts. Investors who hold foreign shares in most IRAs will have to pay taxes as if the treaty didn't exist. Bummer.

Take your portfolio worldwide!
Many firms similar to Lloyds and Unilever are out there, 12 of which I believe would do your portfolio good. I'm talking, of course, about the selections in the Motley Fool's first international investing report, Around the World in 80 Minutes. Among the high yielders featured is a South Asia telecom with a virtual monopoly in its homeland, and a Latin American transportation firm that is making surprising headway on U.S. shores. Even Foolish fund guru Shannon Zimmerman joined the game with a well-diversified global equity fund that features a miniscule expense ratio. If you're ready to go global, the report is available for a fee. Or, better yet, it's free when you sign up for any of our investing newsletters.

Fool contributor Tim Beyers wishes he was as internationally well-traveled as his portfolio. Tim didn't own shares in any of the companies mentioned in this story at the time of publication. You can find out what is in Tim's portfolio by checking his Fool profile. The Motley Fool has an ironclad disclosure policy.