HONG KONG -- Wouldn't it be nice to hold a stock that not only had plenty of upside, but also paid more dividend interest than a bond? That's the way stocks are traditionally supposed pay out, because equity is more risky than fixed income.

While bonds can plunge in value overnight, few highly rated ones do. But even blue-chip companies can fall 10% to 20% on earnings surprises in today's whipsaw market. If you hold a stock, it's nice to know you'll be receiving 5% or so a year in dividend income in return for the risk of owning it, especially in volatile times such as these.

For investors seeking some international diversification, it may come as pleasant news that some stocks in Asia -- particularly Australia -- offer nice fat dividend yields along with good prospects for earnings growth.

Dividend yield is simply the proportion of the stock purchase price that you get in dividends. Classically, for all but high-growth stocks, it's supposed to be higher than the rate of interest you could get on deposit at the bank or with safe bonds. Lately, however, that hasn't been the case.

These days, holders of some of the biggest U.S. stocks have been told by a lot of highflying companies to forget about dividends and to buy into companies in hope that the stock price will rise as others buy in.

Microsoft

(MSFT) - Get Report

, for example, has enjoyed a phenomenal increase in its share price, and pays no dividend at all. To find dividend-paying companies in the U.S., increasingly you have to look to fusty old-economy stocks.

Not so Down Under. Because of Australia's tax laws, many dividends can be tax-free for domestic investors, who then get a financial incentive to reinvest their income and buy more shares -- good news for other investors. While foreign investors don't get the dividend tax break, the payout is still often high enough to be tempting.

For seekers of blue-chip dividends, it doesn't get much better than Australia's banks. Long highly profitable, they pay dividends far higher than what you might expect in the U.S. Among the favored stocks right now is

ANZ Bank

(ANZ)

, which

Morgan Stanley

likes because of higher potential earnings, as well as because of its April sale of

Grindlays Bank

in the Middle East and South Asia for A$2.2 billion ($1.3 billion) in cash. ANZ's dividend yield is 5%, with what most analysts project as good prospects for solid earnings growth.

"The change in ANZ was the risk profile. It was penalized during the Asian crisis" for its Grindlays business, and now that risky portion of its business is gone, says Morgan Stanley Australia strategist Malcolm Wood.

Ord Minnett Securities

also rates ANZ a buy, and notes that the bank has been buying back shares for eight straight weeks.

Investors who want to own ANZ in a mutual fund could consider the

(RPBAX) - Get Report

T. Rowe Price Balanced fund. The problem for those seeking a lot of international exposure is that this fund has a lot of U.S. holdings, although its performance indicates that its managers know what they're doing. The fund has $764,000 in ANZ shares, according to

Yahoo!Finance

, but the fund is so big that this doesn't even put ANZ into the top 10 holdings.

For investors looking for a little steady income while they wait out the current volatile market, high-dividend stocks begin to look tempting. They're even more alluring when you think about the return on bonds, which are supposed to be the place investors go when they want a little steady income from their investments.

According to

Morningstar

, taxable international bond funds returned an average of just 1.4% in the past year, but the average expense ratio was also 1.4%. So, on average all profits were eaten up in fees. Of all taxable bond funds available to U.S. investors, the average return over the past 12 months was 3.3%, with an average expense ratio of 1.1%. Investors were left with a 2.2% return.

That ANZ yield of 5% looks increasingly tempting.