Last week, I mentioned the S&P Dividend Aristocrats list as one of my favorite starting points for researching income stocks. To make this list, companies must have increased dividends for at least 25 consecutive years.

It is mostly U.S. companies that make up the Dividend Aristocrats list. However, Standard & Poor’s puts together another list of dividend growers — the European Dividend Aristocrats. This list consists of blue-chip companies from the S&P Europe 350 Index, which have raised dividends for at least 10 consecutive years and have a market capitalization exceeding $3 billion. There are currently 40 stocks on the European Dividend Aristocrats list.

The European Dividend Aristocrats list is a great starting point for adding international diversification to a portfolio. Many of these stocks trade over-the-counter, but many of the bigger names on the list trade as American Depository Receipts (ADRs) on U.S. exchanges. There is also a nice selection of companies that are familiar to most Americans, like Nokia (NYSE: NOK), Nestle (NESN.EX) and Unilever (UNA.AS).

#-ad_banner-#There are many good reasons to own European dividend-paying stocks. Globalization is one reason. Business happens all over the world and opportunities follow. In general, European companies are better positioned to take advantage of growth opportunities in emerging markets like Eastern Europe and South America than their U.S. counterparts.

Another reason is diversification. There are times when overseas markets offer better investment choices. Looking overseas also expands your options and diversifies risk across multiple markets. The best argument in favor of European stocks, though, may be higher yields. The European Dividend Aristocrats yielded on average 3.9% in 2010, which was much higher than the 2.8% yield of the U.S. Dividend Aristocrats.  

Here are my top picks based on safety, high yield and dividend growth:

1. AstraZeneca PLC (NYSE: AZN)
Yield: 5%
This global pharmaceutical company makes prescription drugs familiar to most U.S. consumers: Crestor, for managing cholesterol levels; Nexium, for acid reflux; Symbicort, for asthma and chronic pulmonary disease. AstraZeneca’s portfolio of drugs generates tremendous cash flow, which has enabled the company to raise dividends 20% in five years, including an 11% boost last year, which increased the yearly payment to $2.55. AstraZeneca shares currently yield 5.2% and the company keeps payout at an easily sustainable 50% level. Investors should note, however, that AstraZeneca will be losing patent protection on some key drugs in the next few years, which could reduce future profit growth below historic levels. 

2. British American Tobacco (AMEX: BTI)
Yield: 5%
While some investors dislike “vice” stocks, tobacco stocks are a reliable tool for adding income and high yields to portfolios. British American Tobacco is a market leader and holds the second-largest worldwide share for tobacco products. The company owns the well-known Dunhill, Kent, Lucky Strike and Pall Mall brands.

British American Tobacco has increased dividends 13 years in a row and 19% in the past five years. Last year’s dividend hike boosted the annual payment to $3.66. The price of the stock is up 15% in the past 12 months and the shares currently yield 4.5%. Analysts think British American Tobacco can deliver long-term growth exceeding 7% a year. Like its U.S. counterparts, British American Tobacco generates enormous cash flow that easily covers its dividend payments — last year, the company produced $5.3 billion, which nearly twice covered $2.8 billion in dividend payments.

3. Novartis (NYSE: NVS)
Yield: 4%
Novartis ranks among the top six drug companies worldwide. This company develops and markets prescription and generic drugs, vaccines, animal health products and over-the-counter products, such as Benefiber, Excedrin and Theraflu. Novartis leverages internal growth with acquisitions and recently spent $12 billion to acquire eye-care company Alcon. The company grew profits 16% last year and analysts predict long-term growth of 13% a year. Novartis pays a $2.35 annual dividend and currently yields 4.2%. The dividend has grown 20% in the past five years and the payout is a conservative 55%.

4. Vivendi SA (VIVHY.PK)
Yield: 7%
Vivendi SA (Vivendi) is Europe’s largest communications and entertainment conglomerate. The company is best known to American teenagers through its Activision Blizzard (Nasdaq: ATVI) subsidiary, which publishes the highly-popular “Call of Duty” and “World of Warcraft” video games. Vivendi also owned a major stake in NBC Universal, which it sold last year for $5.8 billion.

Growth has been slow due to weak results from its French telecom, but Vivendi’s outlook is improving thanks to its fast-growing Brazilian business. The company has grown dividends 8% in the past five years and currently pays a $1.40 annual dividend. Vivendi shares yield 7.0%, and management is committed to paying out 50% of earnings as dividends.

5. Royal Dutch Shell (NYSE: RDS-B)
Yield: 5%
Royal Dutch Shell is among the world’s top integrated oil companies. The company stumbled badly a few years ago when it was forced to take a huge write-down in reserves, but has recently regained its footing. Profits doubled in 2010 and analysts think Royal Dutch Shell can deliver 20% profit growth this year. Although oil prices will mainly determine future sales, cost-cutting and the completion of several major upstream projects  could help boost profits. Royal Dutch Shell’s dividend has grown 8% in five years, to $3.36. At current prices, shares yield 4.7%. The company has two classes of shares, classified as “A” and “B” shares. For U.S. investors, the “B” shares are a much better option, since they do not come with a 15% withholding tax from the Dutch government.
 
Action to Take–> My top pick for conservative portfolios is British American Tobacco. Demand for its products is relatively recession-resistant and the company provides strong cash flow and a 13-year track record of dividend growth. Aggressive investors may prefer Royal Dutch Shell, which has better growth prospects and benefits from rising oil prices.

P.S. — If you’re looking to squeeze as much cash out of your portfolio as possible, you need to see this. In short, a Texas man has figured out how to get the equivalent of a $112 dividend check every single day of the year. Here’s how he does it…