By Virginia Munger Kahn

With bonds providing scant income and dividend-paying stocks in the U.S. getting increasingly expensive, investors are broadening their options by investing in global and international dividend paying exchange-traded funds. So far this year, $1.4 billion has flowed into global and international dividend ETFs. That's 10% of the $13.8 billion flowing into all dividend ETFs, up from 7.5% in 2011 and 5.5% in 2010, according to Morningstar.

Looking overseas for dividend paying stocks makes sense. International equities have historically yielded more than U.S. equities-approximately 100 basis points over the last 10 years, according to a recent BlackRock report. The dividend yield on the S&P 500 currently is 2.1% versus 3.8% for the MSCI EAFE index. The yield on the MSCI Emerging Markets index is 3%. U.S. companies historically have focused more on stock options and capital gains than returning income to investors through dividends.

Even in emerging markets, more companies pay out dividends than companies in the U.S.-94% of the stocks in the MSCI Emerging Markets Index versus 77% of the stocks in the Russell 3000. "Many investors think of emerging markets just for growth," says Jeremy Schwartz, director of research at WisdomTree Investments in New York City. "But companies in emerging markets actually pay out more dividends than those in the U.S."

The average dividend yield among dividend paying emerging market stocks is 4.1% versus 3.1% for U.S. dividend payers, he notes.

Companies in emerging markets also have done a better job of growing their dividends than companies in developed markets. In the last 10 years, while the world has been rocked by financial crises, dividend growth in emerging markets has outpaced that in developed markets-15.34% annual dividend growth in emerging markets versus 9.58% for EAFE and 6.13% for the Russell 3000.

International dividend paying ETFs still have plenty of risk. Dividend issuance tends to be less stable in foreign markets. Companies are quicker to adjust payouts when earnings decline compared to their U.S. counterparts, Schwartz says. Also, while emerging markets have excellent long-term growth prospects, they still are subject to big downdrafts when investors flee risky assets.

International dividend paying ETFs also are subject to currency swings. Those currency swings have hurt U.S.-based returns as the dollar has strengthened recently. However, with the U.S. economy facing sluggish growth and continuing high debt levels, many market analysts believe the dollar will weaken over time, adding value to foreign investments.

Investors interested in dividend-focused international and global ETFs currently have more than two dozen funds to choose from. These range from broadly diversified global funds to funds focused on specific regions or individual countries.

At the top of the performance rankings this year is the WisdomTree Asia-Pacific ex-Japan ETF (AXJL). This ETF, which has $90 million in assets and is based on an index of the same name, has returned 13.04% year-to-date [thru August 15] versus 6.57% for the MSCI EAFE. These returns have been driven by significant holdings in financial stocks in Australia.

Like other WisdomTree dividend-focused ETFs, AXJL weights its holdings based on total dividends paid rather than dividend yield. That results in a portfolio of very large, stable companies, says Morningstar ETF analyst Mike Rawson.

The fund's average market cap is $30 billion and its yield is 3.42%. Almost 50% of the portfolio is invested in the typically high-yielding financial services and communications sectors. By focusing on Australia and Asia, Schwartz says, the fund offers investors the opportunity to diversify their U.S. dividend allocation, while shielding themselves from Europe's problems. One caveat: trading volume is 7,700 shares a day, so investors should use limit orders when trading the fund, Rawson says. The expense ratio is 0.50%.

Another dividend-focused international ETF doing well this year is the iShares Dow Jones International Select Dividend Index (IDV). IDV has $1.03 billion in assets and is up 9.88% year to date. That puts it in the top one percent of foreign large value funds, according to Morningstar. The fund invests in the top 100 yielding stocks-subject to liquidity and quality screens-in foreign developed markets. European companies account for 60% of the portfolio. Holdings are weighted using a combination of indicated annual dividends and dividend yield, and the fund yields 5.3%. Sector diversification is broad with financials at 20% of the portfolio and consumer cyclicals, industrials and utilities at about 13% each.

Top holdings include Commonwealth Bank of Australia, which yields 6.04%, and British American Tobacco, which yields 3.9%. IDV has been more volatile than the MSCI EAFE index, Morningstar analyst Patricia Oey noted in a report. She attributed the volatility to a mid-cap tilt and lack of exposure to Japan. Still, the fund has lost less money over the last five years-down 1.14% annually versus a annual 3.33% for the MSCI EAFE index-and it ranks in the top quartile of its Morningstar category for that period.

A notable newcomer to the category is the EGShares Low Volatility Emerging Market Dividend ETF (HILO), which has $73.5 million in assets. Low volatility and emerging markets are not mutually exclusive terms, says Robert Holderith, president and founder of New York City-based Emerging Global Advisors, the fund's sponsor. The index on which the fund is based screens out any stock that has a beta of 1 or higher to the local market. On the dividend side, the fund looks for consistent dividend payers over the past three years. The result is a portfolio designed to provide investors with the same type of low volatility, dividend focused strategy available in the U.S., but in the context of the faster growing emerging markets, said Holderith. This year, HILO is up 7.45%.

The fund has just 28 stocks in its portfolio and currently yields 5.4%. Communications services account for 42% of the portfolio; utilities are 18.3%. Top holdings include Bhd of Malaysia which yields 4.48% and Mobile Telesystems ADR of Russia, which yields 4.04%. HILO has an expense ratio of 0.85%.

Despite the price tag, Morningstar's Rawson says he's intrigued. "This fund combines two themes we really like-dividends and low volatility. This is definitely one to watch."