Investors have been looking for yield in every corner of the market. The S&P 500 Index has a yield of about 2%, however, there are plenty of overseas exchange traded funds that are yielding over 5%, and they give investors good diversification benefits.

“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 Yield in ETFs]

The Federal Reserve’s commitment to keep interest rates low has investors scrambling faster than before to find yield producing investments and capital appreciation.

Overseas dividend ETFs have been beating the S&P 500 in the yield department most of this year, and should continue to do so. The added bonus of these investments is that a portfolio can gain valuable diversification benefits.

“Furthermore, investors should also note that high dividend paying stocks play a defensive role in a portfolio and can help to reduce volatility in otherwise shaky times. This can be especially true when investors look at high dividend paying ETFs which have the benefits of high yields but spread risk around a variety of sectors and firms,” Zacks wrote in a recent research article.

The following funds highlight economies outside the U.S.:

  • IQ Australia Small Cap ETF (NYSEArca: KROOA dividend yield of 8.56%, then add in the commodity and natural resource exposure. [Growth and Yield with Small Cap Dividend ETFs]
  • SPDR S&P International Dividend ETF (NYSEArca: DWXThe yield of 7.59% far outweighs the S&P 500, and an expense ratio of 0.45% makes this fund affordable. DWX has more than 70% correlation with the developed countries and 15% with the emerging countries. Australia and Germany combine to comprise about 20% of the exposure. [Best Dividend ETFs]
  • STOXX European Select Dividend Index Fund (NYSEArca: FDDThe yield is 6.76% with a tilt toward telecommunications. From a country point of view, approximately 40% of the stocks are from the United Kingdom, 12% from France and 11% from Germany. The rest are based in Switzerland, the Netherlands, Belgium, Bermuda, Spain, Italy and Sweden.
  • Dow Jones International Select Dividend index Fund (NYSEArca: IDVThe yield is 5.15%, and the fund is equally balanced out, with assets holding equal weight. Telecom and utilities are the top sectors represented. Europe and Australia are represented the most.
IQ Australia Small Cap ETF

Tisha Guerrero contributed to this article. 

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.