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Investing internationally is one of the best ways to diversify a dividend growth portfolio. In addition to the benefits of diversifying one's assets into currencies other than the U.S. dollar as a hedge against high inflation and high debt in the U.S. economy, some of the most respected and profitable multinational companies in the world are based outside of the U.S. However, dividend growth investors face two common problems when looking for suitable international stocks:

1) Many foreign governments withhold taxes on dividends paid to foreign investors, which often cannot be recovered if the U.S. investor is holding the stock in a tax-deferred account like an IRA. For example, France withholds 30% and Switzerland withholds a whopping 35%!

2) Many foreign companies pay irregular dividends at long intervals. It is not uncommon for foreign companies to only pay annual or semi-annual dividends and for the dividends to fluctuate up and down based on the current year's profits. These characteristics can make holding foreign dividend stocks difficult for anyone who depends on a regular, stable source of income.

Despite these two problems, there are many excellent foreign dividend-paying companies out there. I have written two previous articles about U.K. stocks with U.S. style dividends and with semi-annual dividends. Another excellent country in which to look for these companies is Canada. This country is home to a large number of profitable companies with stable earnings and long histories of dividend growth. These companies also benefit from easy access to the world's largest economy to the south, an excellent business climate (it is ranked 6th in the Heritage Foundation's 2012 Index of Economic Freedom), and a currency supported by abundant supplies of oil, gas, and other natural resources. Best of all, there is 0% tax withholding on dividends paid out by companies in Canada to U.S. investors for investments within an IRA. There is 15% tax withholding on dividends for investments not in an IRA, but this amount is generally fully refundable as a tax credit for U.S. investors. For this reason, dividends paid by Canadian stocks act as if there is no tax withholding in all cases, solving the first major problem of investing in foreign, dividend-paying companies.

As for the second problem of irregular dividends paid at long intervals, there are many Canadian companies that pay U.S.-style quarterly dividends that grow in a predictable fashion. I would like to highlight three excellent Canadian companies in three diverse sectors that pay U.S.-style quarterly dividends that remain stable with consistent growth from year to year: Royal Bank of Canada (RY), Rogers Communications, Inc. Class B (RCI), and TransCanada Corp. (TRP).

Royal Bank of Canada - This company is the largest bank in Canada, having a market capitalization of $74 billion. According to its website, it has operations in Canada, the U.S., and 51 other countries. The bank generates 40% of revenue from Canadian banking operations, 20% from capital markets, 18% from insurance, and 17% from wealth management. Dividends from the ADR shares are not currency hedged, so they can vary slightly when distributed in USD based on the USD/CAD exchange rate at the time. However, they are stable in CAD with a predictable pattern of growth. The current yield is 4.32% and the 5-year dividend growth rate is 2.7%. It has an estimated 2012 P/E ratio of 10.5 according to data from TD Ameritrade.

Rogers Communications, Inc. Class B - This company is Canada's largest wireless voice and data communications services provider, having a market capitalization of $20 billion. According to its website, the company generates 57% of revenue from wireless services, 27% from cable operations, and 13% from media. Dividends from the ADR shares are not currency hedged, so they can vary slightly when distributed in USD based on the USD/CAD exchange rate at the time. However, they are stable in CAD with a predictable pattern of growth. The current yield is 3.79% and the 5-year dividend growth rate is 27.9%. It has an estimated 2012 P/E ratio of 12.7 according to data from TD Ameritrade.

TransCanada Corp. - This company is one of the largest pipeline operators in North America, having a market capitalization of $32 billion. According to its website, TransCanada owns more than 35,000 miles of natural gas pipelines. In 2010, the company entered the liquids business with the Keystone pipeline, and future growth could come from the Keystone XL pipeline across the United States if given regulatory approval. Dividends from the ADR shares are not currency hedged, so they can vary slightly when distributed in USD based on the USD/CAD exchange rate at the time. However, they are stable in CAD with a predictable pattern of growth. The current yield is 3.72% and the 5-year dividend growth rate is 4.3%. It has an estimated 2012 P/E ratio of 21.4 according to data from TD Ameritrade.

Source: 3 Canadian Stocks With U.S.-Style Dividends For Dividend Growth Portfolios