The economy, at long last, has begun to recover.

That’s not to say things are rosy. Unemployment is still 10%, and some suggest this means the nation’s recovery may be marked by less consumption and higher personal savings than in previous rebounds.

Where can investors earn high yields during such slow-growth periods?

One answer: Utilities.

Utility companies have typically been considered desirable investments during a downturn because demand for life’s necessities remains relatively stable in any economic environment. While people may cut back on luxury goods or meals out, they still tend to turn on the heat and take showers.

Utilities, thus, are considered a “defensive” sector that can keep right on earning solid returns and paying strong dividends in a slow-growth environment. Investment guru Bill Gross recently advocated investing in utilities as a way to play slow economic growth in the years ahead.

In addition to seeking out companies with stable earnings, it makes sense to diversify internationally. The fact is that the astronomical debt being run up by the U.S. government portends poorly for the U.S. dollar. Many experts expect that the dollar will continue to lose value versus other currencies in the years to come, as it did against the world’s major currencies in 2009.

The good news: A weakening dollar means rising distributions from foreign companies.

The WisdomTree International Utilities Sector Fund (NYSE: DBU) offers stable earnings and dividends from utilities as well as international diversification. This exchange traded fund seeks investment results that mirror the Wisdom Tree International Utilities Sector Index. The index measures the performance of dividend-paying utilities in developed markets outside the United States and Canada.

#-ad_banner-#Companies in the index must have paid at least $5 million in cash dividends on common shares in the previous year, and positions are weighted by regular cash dividends paid. The index includes electric, gas and water utilities as well as independent power producers and energy traders.

As of Jan. 8, the fund was most weighted toward France (16.8% of assets), followed by Italy (14.7%), Germany (14.1%) and Spain (13.7%). Top company positions are French electric utility giant GDF Suez, at 7.2% of assets, Electricite de France, the world’s largest utility, at 7.2%, and German utility giant RWE, at 7.1%.

DBU must pay at least an annual distribution, but it has exceeded that by paying quarterly distributions in 2009 with varying distributions in March, June and September and December. Distributions for 2009 totaled $1.09, which translates to a trailing yield of 4.7%.

While utilities had typically been low-growth/high-dividend investments, deregulation and stronger energy demand have turned these once stodgy stocks into higher growth investments. Deregulation in the industry has enabled utilities to expand beyond their local monopolies into other territories, which increased revenue. Some utilities also expanded into higher growth alternative energy areas such as nuclear, wind and solar power.

The Dow Jones Utility Average moved from about 125 in 1970 to 200 in 2002, but as evidence of the increased growth, it soared to about 450 by 2008. In fact, the S&P Developed Ex-US BMI Utilities Sector Index has posted an average annual return of more than +13% per year for the past five years, a period during which the S&P 500 has had a negative return.

Utilities have lagged the market during the past year. DBU returned about +6.3% in 2009 while the S&P 500 gained about +29.0%. And DBU doesn’t have much of a track record as both the fund and the Wisdom Tree Index were launched in October 2006. The fund’s three-year average annual return (as of Sept. 30) of about +4% is slightly better than the S&P 500.

Though utilities have been underperformers, the sector had stellar returns just a few years ago. That’s possible again, even though these companies haven’t gotten pricey in recent soaring markets. DBU offers much of what income investors need in today’s market: stable earnings and dividends, international diversification and inflation protection.

The Wisdom Tree International Utilities Sector Fund pays a solid 4.7% with a good chance of rising. In the current slow growth environment, DBU can be purchased now for strong returns going forward.

P.S. If collecting ultra-reliable dividend checks ever quarter doesn’t excite you — how about getting paid 32 times a month? Sound too good to be true? It’s not — thanks to this proven income strategy.