BOSTON (TheStreet) -- It seems that almost every investment manager is singing the praises of dividend-paying stocks for safety during tough economic times. But Rick Platte goes a step further and says investors ought to find companies that are increasing payouts.Platte, co-portfolio manager of the Ave Maria Rising Dividend Fund ( AVEDX), says rising income will help offset inflation in the coming year. The 10-year U.S. Treasury is yielding only 2%, while the latest reading on inflation is a seasonally unadjusted 3.5%, meaning investors are losing money on government bonds.
Lowe's ( LOW) Company Profile: Lowe's is the home-improvement retail rival to Home Depot ( HD), with more than 1,700 stores in the U.S. Current Share Price: $24.05 (Nov. 29) Dividend Yield: 2.3% Platte's Take: Lowe's stock has endured a tumultuous year, rising as high as $27.45 earlier this year before dropping to a 52-week low of $18.07 in August. Shares have rallied back but are still down 4% this year. With an increasing dividend, Platte sees plenty of opportunity in Lowe's. "It's a stock that has been beaten up pretty badly. Building is held in such low repute right now. I hesitate to even say 'housing,' " Platte says. "But we view it as a well-run company that has exposure to building. Whether it's 2013 or 2014, housing will pick up. Houses need to be taken care of. In a pretty poor environment, they've actually done well. And they've increased their dividend through the hard times." Lowe's was the fifth largest position in the Ave Maria Rising Dividend Fund as of Sept. 30, accounting for 3.2% of the portfolio's net assets.
Sysco ( SYY) Company Profile: Sysco is a North America distributor of food-service products with approximately 400,000 customers. Current Share Price: $28.06 (Nov. 29) Dividend Yield: 3.8% Platte's Take: Sysco may be off the beaten path for some dividend investors when compared to Exxon, which is one of the reasons Platte likes the stock so much. Shares of Sysco are down 4.5% this year and more than 10% since September 2008, before the financial crisis kept diners at home as they tightened the belt and saved money. Platte says that while he waits for foodservice companies to see their business pick up, he's happy to receive a dividend payment of nearly 4%. "Their business has been a well-run company historically," Platte says of Sysco. "Their business has been affected negatively because of food distribution. If people don't eat out, that's less demand for their products. They've also been hurt by food inflation. But Sysco is getting more share in this market and the dividend keeps increasing. I'm getting paid a pretty nice yield to sit and wait."
The Cato Corp. ( CATO) Company Profile: The Cato Corp. is a specialty retailer of women's fashion clothing and accessories. The company operates 1,300 stores in 31 states. Current Share Price: $23.51 (Nov. 29) Dividend Yield: 3.8% Platte's Take: Unlike Platte's other picks, with have market capitalizations above $1 billion, Cato is a much smaller company at only $693 million. "It is probably one of the smallest in our portfolio," Platte says. "But they have no debt and a large portion of the stock price in cash. This stock tends to be more volatile, so it bounces around a lot. Because they don't sell high-end fashion, they've had some negative same-store sales. But it's a good business formula that will continue to do well. They do increase the dividend regularly." Cato shares are down 14% this year and 19% over the past 12 months. However, the stock did hit a 52-week high of $30.77 in July and, earlier this month, the company said net income rose in the third quarter from a year ago even as same-store sales fell 3%.