Dividend Stocks: Staples, Applied Materials

These companies recently boosted their dividends.

Author:: Jonas Elmerraji
Publish date:: Mar 19, 2010 1:50 PM EDT

BALTIMORE (Stockpickr) -- Last week was a comparatively quiet one for dividend stocks, particularly given the slew of investor payouts that capped off earnings season and Wall Street's record week for dividend payment boosts earlier this month. But the previous week still saw some big name increases -- including Staples (SPLS) and Applied Materials (AMAT) - Get Report -- two companies that normally get no shortage of analyst attention.

Analysts should be taking a closer look at the entire list of dividend-boosting stocks from last week -- after all, a dividend increase is a significant signal in this economy. 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.

A dividend increase tells Wall Street that a company isn't just financially fit enough to cut shareholders a check -- it's willing to hand over an even bigger chunk of its cash reserves.

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.

Applied Materials

(AMAT) - Get Report

shareholders have been having a rough year.

Since January, shares of Silicon Valley's semiconductor tool supplier of choice has slid nearly 10%, seriously underperforming the

S&P 500

index, which is actually in the black by single digits over that same period. But that decline could be coming to a halt as analyst murmurings turn in Applied Materials' favor. The company increased its quarterly payouts to shareholders 16.7% to 7 cents per share last week, ratcheting the stock's dividend yield to 2.22%.

That yield puts Applied on the high end of the tech stock spectrum; the industry averages a 0.03% payout. But Applied has more going for it than just a dividend yield. The company benefits from being one of the biggest players in the semiconductor equipment business, a business that stands to make bigger profits as Applied trims down its operating expenses and increases turnover times to woo new customers.

One fund that's hoping Applied's strategy works is

Tocqueville

(TOCQX), a $466 million portfolio that holds Morningstar's four-star rating. The fund also holds stakes in

Pfizer

(PFE) - Get Report

and

Coca-Cola

(KO) - Get Report

in its concentrated 67-stock portfolio.

Major regions of the U.S. have been enjoying unseasonably warm weather this week, a sign that spring is just around the corner. But while the thermostat rises,

Lennox International

(LII) - Get Report

is sure to keep its cool.

The climate control company has been forging its recovery since the global economic slowdown left home improvement and commercial facilities purchases grinding to a halt. A 7.1% dividend hike, and upcoming April earnings should keep investors satiated until the market heats back up completely.

With consumer spending creeping back up, Lennox should see significant increases in orders -- particularly because many "fence sitters" who waited out last summer's unsure economy for their next air conditioning purchase are ready to make a big buy. And although the commercial HVAC business is significantly less susceptible to fluctuations, it's clear that 2010 should bring considerable growth over last year's constrained sales numbers.

One of Lennox's biggest institutional shareholders is

Cannell Capital

, a San Francisco-based hedge fund sponsor that focuses on small-cap investments. Cannell's other investments include

Owens Corning

(OC) - Get Report

and

Crown Holdings

(CCK) - Get Report

Office supply giant

Staples

(SPLS)

delivered lackluster guidance at its fourth quarter earnings release earlier this month, perhaps its dividend increase last month was somewhat of an effort to assuage investor fears that 2010 won't be the banner year that it stood to be.

But whatever the reason, the 9.1% increase in the company's quarterly payout to shareholders definitely hasn't gone unnoticed -- shares of Staples are up nearly 3.5% since the announcement.

Staples still stands to enjoy considerable economic tailwinds right now. With an enormous number of products in its inventory and a podium place as the world's second biggest online retailer -- after

Amazon.com

(AMZN) - Get Report

-- the 10% share of the office supply market that Staples currently claims is no paltry bit of business. And with investor excitement toned down for 2010, the company has room to impress in its next earnings release on May 19.

The

Fidelity Magellan Fund

is among the shareholders who hope that'll be the case. In addition to Staples, the fund also owns positions in

Nokia

(NOK) - Get Report

and

Google

(GOOG) - Get Report