Last year was a disastrous year for global financial stocks.

This year could be different.

In the European Union (E.U.), banks underperformed every other industry group last year, due to concerns about their loans to troubled European countries such as Portugal, Italy, Ireland, Greece and Spain (PIIGS). As bonds of all of the PIIGS tumbled, investors feared that the big banks would have to raise billions in capital by issuing shares, thereby diluting existing holders’ stakes.

To make matters worse, there were widespread rumors at the height of the crisis last fall that some of Europe’s largest banks were teetering on the edge of failure. The resulting spike in interbank borrowing rates was eerily reminiscent of 2008, suggesting that banks were beginning to fear lending to one another.

In the United States, the main problem facing banks last year was continued weakness in the housing markets and accusations of improper foreclosure practices at the country’s largest lending institutions. Bank of America (NYSE: BAC) was hit particularly hard in 2011 and was among the five worst-performing stocks in the S&P 500 Index for the year.

But 2012 couldn’t be more different. The banking sector of the Bloomberg Europe 500 Index is up nearly 20% so far this year, doubling the performance for the index as a whole. And in the U.S., the S&P Financials Index has been the leading sector in the S&P 500.

So, what’s changed? The European Central Bank‘s (ECB) long-term refinancing operations were the primary driver of improved sentiment surrounding the sector in the euro zone.

In December 2011 and late February, the ECB offered banks three-year loans at an ultra-low interest rate of 1%, with the banks borrowing about 490 billion euros in December and 530 billion in February. This means the ECB pumped more than 1 trillion euros ($1.35 trillion) into the European banking system, staving off the threat of a near-term collapse. These cheap loans also encouraged banks to borrow from the ECB at ultra-low rates and invest that capital in Italian and Spanish government debt offering much higher interest rates. The result: the yields on Italian and Spanish government debt have plummeted, easing the funding pressure on these two key E.U. nations.

Meanwhile, largest U.S. banks reached a $26 billion settlement with most states’ attorneys general, settling much of the liability for improper foreclosure practices and setting up guidelines for future foreclosures. This removes one important uncertainty that had been hanging over the banks for much of last year.

You may not feel comfortable investing in the financial sector just yet, but it’s important to note that while many banks have been forced to cut their dividends in recent years, the group has historically been among the highest-yielding sectors of the market. Banks are among the largest and most important sectors of the market, accounting for about 15% of the market capitalization of the S&P 500 and roughly 20% for the major European markets.

And some of the highest yields on these stocks can be found overseas.

I’m not wasting any time. With sentiment toward financials showing signs of recovery, it’s time to look for banks that continue to pay sizeable dividends and have the scope to increase their payouts over time.

I’m doing my due diligence now, so that when the time comes, I can scoop up shares of global financial stocks for my High-Yield International newsletter and lock in higher yields before the rest of the crowd. In fact, I’m already getting income from the global financial sector — I hold one security in my “Ultra High-Yield Portfolio” that yields nearly 10% — and it’s much safer than the yields most investors are reaching for by solely investing in U.S. stocks.

With these points in mind, I scoured the investment landscape, looking for international banks trading as in the U.S. as American Depository Receipts (ADRs) and yielding more than 5.5%. I weeded out any names that have underperformed the global benchmark MSCI World Free Index. I further eliminated all ADRs that trade less than 15,000 shares per day, so the shares would be liquid enough for you to trade relatively easily.

Here’s what I found…

Risks to Consider: Don’t forget, investors ran away from financial stocks en masse for a reason. There’s a difference between a stock that is unfairly punished and carries a high yield and one that deserves to be sold and carry a high yield. These stocks look like good buy candidates to me, but you’ll want to research them further before purchasing them yourself.

Action to Take –> While the common shares of these banks are not currently part of my portfolios, I’ll be monitoring them as conditions improve. I do recommend, however, that investors look at any preferred shares of these banks that trade on American exchanges. As I hinted at earlier, I own preferred shares of one of these banks in the “Ultra-High Yield” portfolio of High-Yield International. In fact, it’s one of  my Top Picks. I’ve held the shares for just over a year, and I’ve collected safe income giving me a total return of about 20% so far.

[Note: If you want to learn more about my High-Yield International newsletter and my other top picks, go here to watch this presentation/read this report.]