Dividend Stocks: Disney, Deere, Ecolab

These companies, including Disney, recently increased their dividends.
By Jonas Elmerraji ,

BALTIMORE (Stockpickr) -- A group of income-seeking investors is getting an extra surprise in its Christmas stockings this year: bigger checks from the companies whose stocks they own.

In the last decade, there's been diminished focus on dividends as high-profile price appreciation in stocks has sent investors looking for profits through capital appreciation. But the crash of 2008 reminded investors that price action can move both ways -- and that dividends might be worth watching again, especially with yields sitting at historic highs.

While many of those yields have been pared down in the last couple of years as stocks' prices recovered, companies have responded to improving economic fundamentals by opting to reward the investors who put their faith in them by

hiking their dividend payouts

.

Those seeking capital appreciation are making a big mistake by eschewing dividends. You see, income stocks are historically the best of both worlds: over the last 36 years,

dividend stocks

outperformed the rest of the

S&P 500

by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, all while paying out cash to their shareholders, according to a study from NDR.

Right now, companies that are willing to part with cash in arguably tough times are worth a second look. And while companies that pay dividends are great, the companies that increase those dividend payouts over time are even better.

Each week, we take a look at companies that are actively increasing their dividend payouts to shareholders. Without further ado, here's a look at

this week's dividend stocks

.

First up this week is

Disney

(DIS) - Get Report

, the $70 billion entertainment company that's known for its cable networks, theme parks, film studio and massive intellectual property portfolio.

Disney has performed well in 2010, outpacing the S&P by 335 basis points so far this year. Last week management decided to improve on that performance by announcing a 14.3% dividend increase that brings the company's total annual payment to 40 cents per share.

Despite some tumult in Disney's shares following its fiscal fourth-quarter release, the company has continued to perform at a high level overall this year. Even though the theme park business has been hampered by high fixed costs and a cutback in travel spending of late, it's continuing to show incremental improvements (including a 6% uptick in spending and a 5% increase in reservations in the latest quarter).

More impressive right now is the cable business, which contributes a major chunk of the company's bottom line. The jewel in the cable crown is

ESPN

, which has remained a strong performer thanks to a business model that avoids over reliance on advertising prices.

From a financial standpoint, Disney is in exceptional shape. Current debt loads are more than manageable, and the company's asset base generates significant cash flows to pay any obligations as they're due. Expect Disney's dividends to keep flowing for the foreseeable future.

That's the hope of the

T. Rowe Price Equity Income Fund

(PRFDX), which owns shares of Disney in addition to positions in

Chevron

(CVX) - Get Report

and

American Express

(AXP) - Get Report

.

Ecolab

(ECL) - Get Report

has worked hard to build itself as the dominant manufacturer of commercial cleaning and sanitizing products, more than doubling its market valuation in the last decade.

Over that time, the company has maintained a dividend yield of around 1.5% annually by increasing its dividend payouts. The latest increase, of 12.5%, came last week. That move brings Ecolab's quarterly payouts to 17.5 cents per share.

Much of Ecolab's success has been built on the back of the company's approach to sales. Teams of sales reps make constant visits to client sites, ensuring that Ecolab's products live up to expectations -- and opening the door for cross-selling opportunities.

For all its efforts, the company readily admits that there are substantial untapped opportunities in the sanitizing products industry and has assured investors that it's prepared to take advantage of them. International expansion holds a major key to growth, but increased competition will pose a serious challenge; instead, cross-selling opportunities among Ecolab's existing customer base will likely be a more approachable target in the short-term.

The

Baron Partners Retail Fund

(BPTRX) is among Ecolab's largest institutional shareholders. The fund also holds stakes in

Hyatt Hotels

(H) - Get Report

and

Fastenal

(FAST) - Get Report

.

Heavy-equipment giant

Deere

(DE) - Get Report

has enjoyed a monumental rally in 2010, rocketing 49% year-to-date on a string of solid quarterly sales reports. But investors shouldn't forget about the company's quarterly dividend, which increased 16.7% last week to 35 cents per share.

The rally in agricultural commodities we've seen in 2010 has helped to buoy shares of Deere enough to fill some of the voids where construction slowdowns halted equipment sales in 2007 and 2008. As commercial farmers see their margins expand, they're becoming increasingly willing to upgrade and update their equipment to cope with added demands of the current market.

Construction does still offer upside in

emerging markets

, where existing equipment is often inadequate to handle the logistical demands of ambitious products. Countries such as China and Brazil should continue to boost Deere's bottom line in the mid-term, especially if the effects of QE2 continue to weaken the dollar.

Meanwhile, dividend funds such as the

Blackrock Equity Dividend Fund

(MADVX) are continuing to collect sizable capital gains in addition to a respectable dividend payout. The fund, which holds Morningstar's coveted five-star rating, also owns shares of

Raytheon

(RTN) - Get Report

and

Wells Fargo

(WFC) - Get Report

.

For the rest of this week's dividend stocks, check out the

Dividend Stocks for the Week portfolio

on Stockpickr.

And if you haven't already done so,

join Stockpickr

today to create your own dividend portfolio.

-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, Elmerraji had no positions in stocks mentioned.

Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.

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