Emerging markets put a spring in the step of Cullen International High Dividend. By Elizabeth Leary, Contributing Editor January 7, 2008 International stocks coasted through 2007 relatively unharmed by the murmurs of a bear market that spooked Wall Street. As of mid December, foreign stocks stood poised to beat U.S. stocks for the sixth year in a row -- the MSCI EAFE index returned 15% year-to-date to December 10, six percentage points more than Standard & Poor's 500-stock index. In its two years of existence, Cullen International High Dividend (symbol CIHIX) has used a relatively conservative, value-oriented stock-picking process to breeze past the category averages. Managers Jim Cullen and Rahul Sharma screen for stocks that yield at least 3% and are among the 20% with the lowest price-earnings ratios. "History shows that when the market goes down, high-dividend stocks go down half as much," says Cullen. But what really piques Cullen's interest are emerging markets. Only 25% of the fund's $44 million in assets is invested directly in emerging-markets stocks, but he loves companies in developed markets that effectively target emerging-economy consumers. One of his favorites is spirits maker Diageo (DEO), which is aggressively marketing its brands in China and Latin America (see The Virtues of Vice Stocks). "At Chinese weddings they don't drink champagne," says Cullen. "They drink Johnnie Walker Red." He's also bullish on Unilever (UL), which generates 41% of its sales in developing markets.