Dividend Stocks for the Week

By Jonas Elmerraji

BALTIMORE (TheStreet) -- As earning season kicked off, it may have seemed last week that investor focus was dead set on quarterly numbers. On Thursday, the markets reacted wildly after companies such as Goldman Sachs(GS Quote) and Citigroup(C Quote) reported their profits, and on Friday, stocks took a tumble as Bank of America(BAC Quote) revealed a quarterly loss.

As investors reacted to company news, a handful of stocks were raising their dividends.

Increasing a dividend is a big deal for any company, but it's a particularly significant event in the midst of a recession. Historically, companies that pay dividends materially outperform those that don't, and when the market turns bearish, dividends could be the only semblance of return that investors see for a while.

That's why every week Stockpickr reviews recent dividend declarations and compiles a portfolio of dividend-increasers. These stocks represent some of the most enticing investments on the market right now.

First up on this week's list is Reynolds American(RAI Quote), the North Carolina-based tobacco giant that has made our list already this year. Reynolds has been a strong performer in 2009, delivering 20% returns to investors since January. That's largely because of Reynolds' "sin stock" appeal.

Sin stocks, or companies involved in businesses such as tobacco, alcohol and gambling, may be somewhat controversial, but good is certainly to be found in their returns. During economic hardship, sin stocks traditionally outpace the rest of the market as consumers flock to their products to relieve stress and unwind.

That's part of the reason that Reynolds has been able to afford another dividend hike this quarter, after posting higher profits of $1.29 per share. Among Reynolds' investors are shareholders of the Allianz NFJ Dividend Value Fund (NFJEX), a fund which also owns shares of tobacco competitor Altria(MO Quote), which pays a 7.45% yield, and toymaker Mattel (MAT Quote), which pays a 3.83% yield.