By Carla Pasternak
The U.S. national debt sits at more than $11 trillion dollars - double its total from just 10 years ago. With that amount of debt, some are questioning the dollar's status as the world's reserve currency.

But there is a silver lining.This massive spending, combined with movement out of U.S. Treasuries, is going to take its toll on the dollar - and international income investors could reap the rewards in the form of higher dividends.

Living in Canada, I can see the impact of the falling U.S. dollar at first-hand. From 2002-2007, the Canadian dollar soared uninterrupted over its stateside counterpart.

Over that time, it usually cost me less to purchase anything in U.S. dollars... be it investments or vacations. Even though I was spending the same amount of money, my Canadian dollar simply went further in the U.S.

But if you're living in the U.S., don't fret. You can take advantage of the same phenomenon by investing abroad. And if you're an income investor, you'll find that your dividends can soar because of it - even if the underlying company doesn't raise them a cent.

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How Far The Mighty Fell
From a peak in July 2001 to a low in April 2008, the U.S. Dollar Index fell by a staggering 41%. As world economic growth exploded, investors somewhat shunned the U.S. markets, instead focusing on developing nations with high growth prospects.

Meanwhile, U.S. deficits began to soar at an astounding rate. Public debt ballooned over 50% - from $6 trillion in 2000 to over $9 trillion in 2007. And no matter whether it's a company or country, heavy debt loads can lead to instability.

So with foreign markets booming and the U.S. racking up more debt, entities around the world demanded fewer dollars, underpinning its long-term decline.

However, with the onset of the financial crisis, the trend reversed. As the economic crisis spread, investors parked cash in still safe-haven U.S. Treasuries to ride out the storm. As a result, during the height of the financial turmoil - July 2008 and March 2009 - the U.S. Dollar Index soared 24%.

Now, however, the long-term downtrend seems to be reappearing, as the fundamental reasons for the dollar's prior decline have amplified over recent months. For example, the U.S. government has borrowed and spent like never before. The Obama administration estimates the budget deficit will soar to $1.84 trillion in 2009 and $1.26 trillion in 2010.

And as panic from the financial crisis has waned, dollars are flowing out of dollar-denominated assets like Treasuries and into foreign investments once again - even though some foreign countries have debt loads and credit ratings that are worse than the United States.

The U.S. Dollar Index has already fallen 10% since March - and that's good news if you're investing abroad for income.
Falling Dollar = Higher Income
By investing abroad, you'll see your dividends increase in dollar terms as the U.S. dollar falls. For example, between July 2001 and April 2008 the dollar lost 46% of its value relative to the euro. Let's say that over that time, a European stock paid 5 euros a year in dividends. In 2001, you'd have received just US$4.20 in exchange. But after the dollar fell, that same 5-euro payment would be converted to US$8.00 in 2008 - an increase of over 90%, even though the actual payment didn't increase by one cent.

And investing abroad isn't as exotic or complicated as you might think. Many foreign companies trade on the NYSE. They simply make dividend payments in their native currency and translate them to dollars for U.S. investors. In addition, several full-service and discount brokers offer direct access to foreign exchanges denominated in foreign currencies.

Either way, as the dollar declines, your income and the value of your dividends will increase in dollar terms. And given how enormous deficits and continued foreign investment will take their toll on the dollar, this boost could happen sooner rather than later.

If you want to take advantage of the falling dollar, you might like the Brazilian energy giant I'm looking at right now. It already yields a whopping 7.8%, based on payments totaling about US$3.70 in the past year. And over the past four months, the dollar has fallen about 20% against the Brazilian real. If that continues, you'll see even higher payments from this stock in dollar terms.

In my High-Yield International issue, I share some of my favorite ways to turn the falling dollar in your favor, including the Brazilian energy giant I just mentioned. You'll also find a Taiwanese tech play yielding 9.5... a rare Mexican monopoly yielding 13.4%... and my list of 10 "Star Performers" yielding up to 19%. You can get all this in my issue now. Good investing.
(Carla Pasternak is Editor, High-Yield International, Courtesy: Smart Profits Report )

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