SM: Global Dividend Payers

Dividends are all the rage. These foreign stocks pay them, but which one is the best to buy now?

Buy: Novartis

At first glance, Novartis (NVS) doesn't look like a blockbuster. The Swiss drugmaker's top seller, blood pressure medication Diovan, is already fighting off generic competition in Europe and will lose its patent protection in the U.S. this year -- and even Novartis says total sales will not grow much, if at all, in 2012. But Jason Brady, comanager of the dividend-loving Thornburg Investment Income Builder fund, says there's an "extremely powerful" argument for buying shares now. The stock trades at a reasonable 10 times estimated profits, Brady says, and the firm's generic and eye-care offerings should be enough to steady sales, even if the next big drug doesn't come for a while. Investors, in the meantime, are being paid well to wait. The stock yields 4.6 percent, and Novartis has raised its dividend every year since 1996.

Sell: BAE Systems

Traditionally, investors have appreciated the fact that the sales of London-based BAE Systems (BAESY), unlike those of many other defense contractors, aren't tied to one nation's armed forces. Its stock also yields 7.5 percent. But now defense cuts are looming on both sides of the Atlantic, and analysts say those cuts might hit BAE's key land and armaments division particularly hard. "There's a shift in priorities away from ground wars," says independent defense analyst Scott Sacknoff. A BAE spokesperson acknowledges the tough environment but points to a number of recent sales outside its two top markets, including deliveries of its Typhoon combat plane to Saudi Arabia.

Hold: Itau Unibanco Holding

Faith in the stock of Itau (ITUB), Brazil's largest bank by market value, has paid off handsomely for investors; it has returned, on average, 21 percent a year for the past decade. But while Forward International Dividend fund comanager Bruce Brewington likes the stock and its dividend, he says the firm faces a few short-term obstacles. Some analysts worry that Brazilian consumers are overspending and may not be able to pay off their debts in the future. As a result, Ita has had to increase the amount of money it sets aside for bad debts. "They're going to have a tougher year in 2012," Brewington says. The company says it expects its allowance for bad debts to remain stable this year.