Investors searching for yield in today’s ultra-low interest rate environment might benefit from looking farther abroad. While US stock dividend strategies have worked like a charm in recent months, many lesser known dividend plays in other regions deserve a closer look at today’s prices.Lately, American dividend-paying stocks have been the gold medal winners among stock market sectors. During the past twelve months ending July, the Dow Jones US Dividend Select Index, a representative basket of higher-paying American equities, advanced 16.3 percent compared to a 9.1 percent increase in the broad market S&P 500 stock index. Over the same period, the all-inclusive MSCI World stock Index declined by 1.4 percent and the Dow Jones Global Select Dividend Index which tracks global high-dividend payers fell by one percent. Although a good part of the relative outperformance of American equities came from a resurgent US dollar, the fact remains that many other regions are providing meaningfully higher dividend payouts compared to the US averages. Attendees of this year’s LOM market strategy luncheon in April might remember our charts and tables showing this differential which still holds true today. As of this writing, the Dow Jones US Dividend Select Index has an indicated dividend yield of 3.9 percent while the Global Select Dividend Index is paying 5.2 percent, over 30 percent higher.Higher quality, dividend-paying US companies have been amply rewarded this year as America has lately been viewed as a relatively more investor-friendly environment.Yet a study published by Fidelity just this month argues that foreign stocks generally pay better yields up front; and furthermore, those international equities with a track record of regularly increasing their dividends each year have been providing better investment returns.The study determined that from 2002 to 20011, foreign stocks paid out four to five percent on principal while US stocks paid just about two percent. Over the same interval, a basket of dividend-increasing foreign companies offered a six percent total return compared to their US counterparts which returned just four percent.Bermuda residents who are spending local dollars tied to the greenback need to also consider currency translation effects which can dramatically sway returns in either direction. However, with the US dollar hovering near its twelve- month high, bets outside the world’s largest currency are becoming increasingly attractive. Realistically, the US dollar could soon begin to resume its longer term slide in front of the fast-approaching American elections in November. The increasingly expansive philosophical rift between Republican and Democratic parties suggests a high probability of another budget stalemate which could put more selling pressure on the US dollar.Of course, any further decline in the greenback creates an immediate currency windfall for foreign stocks on top of the extra yield pickup.Rapidly unfolding American political events through year-end are likely to be constructive for translation gains on non-US regions in the short run, but even on a longer term basis those few nations which are actually showing some level of fiscal responsibility may be further rewarded with stronger currencies. In my article “Investing in the Lucky Country” published in here earlier this summer, I mentioned Australia’s exemplary fiscal position in addition to having substantially higher stock and bond yields.Since the article was run on July 7, the Australian dollar has already begun to advance against the greenback and the perhaps best part of the story is that the yield on Australia’s highest paying stocks is approximately 70 percent greater than the US high-dividend paying index. For example, we own Telstra Corporation, Australia’s largest phone company which yields 7.6 percent. A comparable company in the US would be Verizon Communication paying 4.7 percent.Dividend stocks have been a great investment sector over the past couple of years, but the party might not yet be over. Against the ongoing backdrop of ultra-low interest rates on high grade bonds, dividend strategies as a separate asset class have become increasingly popular among the financial planning and asset allocation community.Importantly, new Exchange-Traded Funds (ETFs) are opening up each month and easily attracting new funds. According to Morningstar research, as of last year, the number of dividend-focused ETFs had grown from 29 to 49 and total assets under management had increased from $22 billion to $47 billion.Each week, money pours into the new funds and the early progress continues to feed the group’s momentum.Outside of the US, emerging markets represent an intriguing place to search for yield. With the US-based S&P 500 still within two percent of its four-year high, while the emerging market index is trading over 20 percent below last year’s peak, the timing might be ripe to explore developing market dividend plays. Right now, the average yield on the Dow Jones Emerging Markets Select Dividend Index is 5.1 percent, putting it well above the similar US benchmark.Adding to the attractiveness of emerging economies, these markets possess enticing relative valuations despite superior growth potential. According to the latest International Monetary Fund (IMF) survey published in July, emerging economies are forecasted to grow at almost three times the rate of advanced economies next year.And yet, the emerging markets dividend stock index trades at a 15 percent lower price/earnings (valuation) multiple than a comparable US basket, using next year’s projected profits.The optimal yield strategy for each portfolio depends upon a number of factors including risk tolerance, time horizon and base currency spending considerations.The LOM Stable Income Fund launched just over a year ago (see our August 18thpress release here) uses both individual securities and ETF’s to boost yield but actively rotates among the most strategically attractive sectors on a tactical basis.We believe in the active management process as regional and sector considerations are critical to providing stability through diversification and opportunistic positioning for generating the highest risk-adjusted returns.Bryan Dooley, CFA is a senior portfolio manager at LOM Asset Management Ltd in Bermuda specialising in the areas of asset allocation, portfolio management and quantitative process. He is a Chartered Financial Analyst, possesses an MBA from the College of William and Mary and has held key positions with progressive financial institutions worldwide throughout a career spanning more than 20 years. Please contact LOM at 441-292-5000 for further information.This commentary is for information purposes only. It is not intended as an offer or solicitation for the purchase or sale of any financial instrument, investment product or service. The information contained herein, has been compiled from sources believed to be reliable, but no representation or warrant, express or implied, is made by LOM Asset Management Ltd or any of its affiliates or representatives, as to its accuracy, completeness or correctness. Readers should consult with their Investment Advisor if such information and or opinions would be in their best interest when making investment decisions. LOM is licensed to conduct investment business by the Bermuda Monetary Authority.