Dividend Stocks: Garmin, Mead Johnson

These companies recently increased their dividends.

By Jonas Elmerraji , Mar 26, 2010 11:37 AM EDT

BALTIMORE (Stockpickr) -- Dividend hikes have been quiet for a second consecutive week after the flurry of announcements earnings season brought investors. Now that announcements are back to normal, the companies who increase their payouts to shareholders are even more telling. After all, companies have less earnings noise to compete with right now, and a dividend increase does more than just catch investors' eyes -- it suggests that a company is fundamentally secure enough to justify parting with additional cash.

Dividends are definitely worth watching. Historically, companies that pay higher 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. When a company actually increases its dividend, investors would do well to take notice.

With that in mind, here's this week's roundup of recent

dividend-increasers

. These stocks represent some of the most interesting income investments on the market right now.

While GPS giant

Garmin

(GRMN) - Get Report

has benefited in recent years from the popularity of consumer global positioning system devices, economic headwinds of late have curtailed major growth efforts. But with a 100% dividend increase that puts the company's current annual payout at $1.50 per share, the company's effective 3.78% yield should guarantee that share prices make an upward move.

With a debt-free balance sheet and nearly $10 per share in cash and short-term investments, Garmin's well-positioned to continue returning cash to shareholders, but the company will need to innovate if it wants to see shares continue to climb in 2010. With a strong share of GPS devices in the aviation, boating, and auto markets, Garmin has focused on increasing its footprint in the consumer space. The company's nüvifone offering has been slow to start following its delayed entrance into an already-saturated cell phone market, but the long-term payoff should be the IP that Garmin's R&D team has developed.

One fund that's hoping for just such a payoff is the

Columbia Technology Fund

(CTCAX), which seeks out tech stocks due for capital appreciation. Other tech bets the Columbia fund is making include

Priceline

(PCLN)

and

Apple

(AAPL) - Get Report

Mead Johnson Nutrition

(MJN)

has been performing well since the company's spinoff from

Bristol-Myers Squibb

(BMY) - Get Report

last February. Shares are up almost 93% since the pediatric nutrition company IPO'd at what proved to be the beginning of the biggest bull run of the decade. The company's 12.5% dividend hike brings its quarterly payments to 22.5 cents per share, a 1.74% yield for investors.

Ultimately, population growth will continue to be a driver of Mead Johnson's top-line numbers. The company's infant formula and children's nutrition lines have seen significant growth prospects in the emerging market economies of Asia and Latin America, where a disproportionately large segment of the population is under the age of 18. As developing countries move toward the Western world's two-income philosophy, Mead Johnson should see a spike in formula sales abroad.

Unlike Garmin, Mead Johnson is saddled with a significant amount of debt as a result of its spinoff. Still, a relatively recession-resistant product offering and substantial free cash flow generation should keep the company's dividend safe. Among Mead Johnson's owners is

Tudor Investment Corp.

, an investment firm managed by legendary trader Paul Tudor Jones. Other Tudor holdings include

Citigroup

and

Google

(GOOG) - Get Report

Security and industrial product conglomerate

Tyco International

(TYC)

has seen its financial position improve dramatically as the broad economy improved in the last year. Clearly, those improvements have made an impact on management given their decision to increase dividends last week, bringing the company's payouts to shareholders to 21 cents per share.

But it's far from a rosy situation at Tyco. The company continues to be plagued by past scandals, such as the $150 million theft perpetrated by former CEO Dennis Kozlowski and CFO Mark Swartz. Although the million-dollar company-funded birthday parties are a thing of the past, the class action settlements that Tyco continues to pay off present a significant fundamental barrier.

That's not to say that Tyco isn't making a speedy recovery. Right now, a significant portion of the company's revenues are recurring -- including its ADT subscription fees -- a feature that many businesses envy when times are tough. And despite $3 billion in legal settlements, the company actually maintains a fairly healthy balance sheet, yielding an upgrade on its debt rating from S&P. While Tyco continues to carve its way out, the company's payouts to shareholders should at least be safe.

That's something that shareholders of the

Legg Mason Partners Aggressive Growth Fund

(SHRAX) are hoping for. The fund owns shares of Tyco, as well as stakes in

Intel

(INTC) - Get Report

and

Freeport-McMoRan

(FCX) - Get Report

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

Dividend Stocks portfolio

on Stockpickr.

And if you haven't already done so,