Even though U.S. blue chips like Pfizer (NYSE: PFE) have helped investors accumulate fortunes over the long run, the temptation to look abroad for the world's best dividend stocks is strong.

Many foreign stocks offer higher dividend yields than their U.S. counterparts do. For example, U.K.-based cruise operator Carnival plc posts a healthy 3.9% dividend yield, while its main U.S. competitor, Royal Caribbean, pays out just 1.9%.

Not all dividend stocks are created equal
Despite the tremendous opportunities available to generate income from companies abroad, stateside investors should know two things before stamping their passports:

  • Dividend regularity -- or lack thereof. Foreign companies' dividends can be larger than U.S. companies', but they're often less regular in timing and amount. Companies abroad like to pay a target percentage of earnings, instead of a certain cash value every year. Don't knock it: Freed from the pressure to lowball their payouts, these companies can pay you more over the long haul.
  • Dividend taxation. Foreign companies (except for those in the U.K.) can scalp you at their going rate. Still, most countries in which you're likely to invest have tax treaties with the United States, so you can claim a credit for the tax withheld. But here's the rub: Because a credit offsets taxes you would have otherwise paid, it's smart to hold foreign stocks in a taxable account. In other words, skip the IRA if you're going abroad.

Of course, not all foreign dividend stocks are created equal. So each week we highlight a five-star foreign dividend payer with the assistance of the 100,000 investors participating in Motley Fool CAPS, the Fool's free investing community. After all, having a second (or 300th!) pair of eyes can help you separate the wheat from the chaff.

Why buy the milk?
Foreign dividend investors are relatively limited in terms of the global regions in which they can find a diverse assortment of quality dividend-paying stocks. Many emerging-market stocks, like Sohu.com (Nasdaq: SOHU) and New Oriental Education (NYSE: EDU), often serve shareholder interests better by reinvesting extra cash into the business to sustain scorching earnings growth. But while a dividend culture is slowly catching on in the emerging markets, income-hungry investors still primarily need to focus their attention on developed markets for a diversified dividend portfolio.

One dividend-leaning investment vehicle that CAPS investors have blessed with a five-star rating is the Vanguard European Index ETF (AMEX: VGK), which holds European dividend titans like BP (NYSE: BP), Nokia (NYSE: NOK), and HSBC (NYSE: HBC).

The exchange-traded fund posts a trailing dividend yield of 3.3%, which it pays out in a one-time distribution at the end of the year. CAPS investors don't mind the wait -- of the 120 CAPS players who have rated the Vanguard European Index, fully 98% believe it will outperform the S&P 500. One of these bulls is Zen1212, who last November cited a Morningstar report that argued that this is the broadest European-focused ETF, and with the lowest expenses to boot.

With a microscopic expense ratio of 0.12%, it's pretty tough for other European ETFs to compete in terms of cost. Moreover, for a straight index-tracking ETF, its dividend yield is pretty plump. For instance, the WisdomTree Europe High Yielding Equity ETF covers many of the same companies as the Vanguard fund and also yields about 3.3%, but comes with a pricier, though still reasonable, expense ratio of 0.58%.

What do you think about Vanguard European ETF -- or any of the other companies mentioned? Make your voice heard on Motley Fool CAPS today.

New Oriental Education & Technology Group is a Motley Fool Global Gains selection. Pfizer is a Motley Fool Income Investor pick. Pfizer is a Motley Fool Inside Value recommendation. Royal Caribbean is a Stock Advisor selection. Try any of our Foolish newsletters today, free for 30 days.

Todd Wenning will take on anyone in NHL 1994 for Sega Genesis. He owns shares of Vanguard European ETF, but of no other company mentioned. The Fool's disclosure policy once had to fill a brandy glass with brown M&Ms, or Ozzy wouldn't go on stage that night.