7 Dividend Stocks Paying You More Cash

BALTIMORE ( Stockpickr) -- If you're an income investor, you'd better get ready to see some cash start flowing from corporate balance sheets to your portfolio. The dividends are trickling in as the inaugural week of earnings season kicks into high gear. A handful of names announced increases in the amount of cash they're paying out to shareholders, jacking up returns in an environment where uncertainty is reigning.

And it only makes sense to expect more of the same for the rest of July.

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That's because while earnings season starts as a trickle, the tap opens to full flow next week with more than 90 S&P 500 components announcing their numbers to Wall Street between next Monday and Friday. And since earnings releases and dividend announcements tend to go hand in hand, the likely outcome is that next week will be rife with bigger dividend payouts -- a factor that bodes extremely well for your portfolio's total returns.

How well? Over the last 36 years, dividend stocks have 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 data compiled by Ned Davis Research. The numbers are even more compelling when looking at companies that consistently increase their payouts.

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That's why we pay close attention to the firms that are shoveling more corporate cash to shareholders. With that, here's a look at seven stocks that hiked payouts recently.


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New Dividend: 50 cents quarterly (per share)

Dividend Percent Increase: 25%

Current Yield: 2.39%

Engine maker Cummins ( CMI) designs and builds the diesel and natural gas truck engines found in everything from higher-end Dodge Rams models to the big rigs on the highway.

The firm's dividend engine is also cranking this week. On Tuesday, management announced a 25% increase to the firm's quarterly payout, bringing it to 50 cents per share. That's a 2.39% yield at current price levels.

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Cummins is an integrated engine supplier, building everything from turbochargers to the power units and filtration systems used on its engines in-house. That positioning gives CMI better control over its manufacturing process and over costs. The double-digit net margins the firm earned in the last year are a testament to that.

Of course, the dividend hike in Cummins wasn't a complete surprise; the firm was one of the 5 Industrial Stocks Poised for Bigger Dividends that I talked about at the start of June.


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New Dividend: 19 cents quarterly (per share)

Dividend Percent Increase: 11.76%

Current Yield: 1.71%

Fastener and maintenance product supplier Fastenal ( FAST) is another name that announced a dividend hike this week. On Wednesday, FAST reported that it would be increasing its quarterly shareholder payout by 11.76% to 19 cents per share. The move puts FAST's dividend yield at 1.71%.

While that doesn't exactly qualify Fastenal for "core income" status, it does point to the fact that this stock's share price has been trailing its fundamental performance in 2012. A bigger dividend means that shareholders get more their share of that financial performance.

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Fastenal owns an attractive share of the maintenance product business through its network of more than 2,600 stores, a geographic footprint that most rivals can't touch. Even though the industry is quite fragmented, Fastenal's best-in-breed status should continue to grow its share -- especially now that FAST has started supplying the U.S. government.

As of the most recently reported quarter, Fastenal was one of Ruanne Cunniff's holdings.

Healthcare Services Group

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New Dividend: 16.375 cents quarterly (per share)

Dividend Percent Increase: 0.77%

Current Yield: 3.11%

Small-cap service firm Healthcare Services Group ( HCSG) may have only hiked its dividend by 0.77% on Tuesday, but the move was more than ceremonial. HCSG's hike to 16.375 cents per share puts the firm's dividend yield at an attractive 3.11% given current price levels.

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The firm services health care facilities, managing the housekeeping and food service needs of hospitals, nursing homes, and rehab centers. Because of that exposure, shares have been rallying hard in the last month, buoyed by the Supreme Court affirmation of Obamacare, a decision that should have positive impacts on healthcare facilities.

While HCSG's small-cap status introduces more volatility than a bigger alternative, its pure-play positioning as a servicer (not an owner) makes it a nice secondary name for income investors looking for healthcare exposure.

Bank of the Ozarks

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New Dividend: 13 cents quarterly (per share)

Dividend Percent Increase: 8.33 %

Current Yield: 1.74%

Bank of the Ozarks ( OZRK), a regional bank based in Arkansas, is another small-cap stock. It has 110 branch offices spread throughout the South, a geographic footprint that gives it exposure to some of the weaker post-crash housing markets. Still, despite that positioning, the bank has managed to continue churning out the types of hefty margins that investors have come to expect from prototypical regional banks.

Last Monday, the firm announced an 8.33% dividend increase, bringing its payout to a quarterly 13 cents per share.

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That's a 1.74% yield at current price levels. While OZRK's payout is decent for a small bank, there are other ways to get exposure to regional banks right now that carry less risk for bigger rewards.

Bank of the Ozarks, one of the 10 Smaller Stocks With Growing Dividends, was also featured in " 5 Hated Stocks Set to Soar on Earnings."


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New Dividend: 40 cents quarterly (per share)

Dividend Percent Increase: 14.29%

Current Yield: 3.51%

Industry headwinds have taken their toll on the semiconductor industry this year, particularly this week thanks to a number of downward revisions at a handful of prominent chipmakers. And semiconductor manufacturing supplier KLA-Tenor ( KLAC) has been no exception thanks to a 5.6% decline in price since the first trading day of January. The firm is trying to tack on performance this week with Tuesday's 14.29% dividend hike, a move that brings KLAC's quarterly dividend payout to 40 cents per share.

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With revenue scraping up against pre-recession highs this year, KLAC has made some big strides towards regaining its stride after the financial crisis took the wind out of the semiconductor industry's sails early on. Because KLA-Tenor supplies process management systems for chipmakers, it's less susceptible to headwinds than its own clients. After all, KLAC's offerings are designed to help improve efficiency and reduce excess costs, something factories are willing to spend on even when times are tough.

A hefty yield makes KLAC a solid core income holding when some of the negative sentiment comes off of the semi industry.

As of the most recently reported quarter, KLA-Tencor was one of Ray Dalio's Bridgewater Associates holdings.

Ryder System

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New Dividend: 31 cents quarterly (per share)

Dividend Percent Increase: 6.9%

Current Yield: 3.47%

Ryder System ( R) is a major name in the truck rental and leasing business, focusing especially on recurring commercial clients who don't need or want to part with the capital required to purchase their own truck fleets. Ryder's ability to hang onto its margins has been impressive, particularly given the scale-down in revenues that the firm saw in the past two quarters.

High oil prices are a big headwind for Ryder, as customers opt to look for alternatives to traditional over-the-road transportation, but this firm has managed to eke out consistent performance in spite of commodity swings. This quarter, they should work in Ryder's favor for a change.

After Wednesday's 6.9% dividend hike, Ryder now pays out a quarterly dividend of 31 cents per share, a 3.47% yield at current price levels. While Ryder makes a solid core income holding for investors looking for exposure to the transports sector, I'd recommend sitting on the sidelines for now -- Ryder has been in a sustained downtrend since January. From a technical standpoint, it makes sense to stand clear until shares find a bottom (and a bigger yield).

Ryder was one of the 10 Worst-Performing S&P 500 Stocks in the Second Quarter.

A.O. Smith

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New Dividend: 20 cents quarterly (per share)

Dividend Percent Increase: 25%

Current Yield: 1.68%

It's been a solid year for shareholders of A.O. Smith ( AOS) -- the mid-cap water heater maker has rallied more than 18.6% so far in 2012. A.O. Smith has a big tailwind from its core product. After all, water heaters aren't something that most customers are willing to put off replacing when the time comes.

While a pullback in construction spending has ultimately impacted AOS substantially in the last several years, the firm has slowly been climbing sales post-recession. The economic payoff and convenience of bigger-ticket products like on demand tankless heaters could be a big catalyst to help make up for lost ground on the top line as consumers look for ways to make their homes more efficient.

AOS announced a 25% dividend hike on Monday, bringing its quarterly dividend to 20 cents per share, a 1.68% yield.

To see these dividend plays in action, 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, author 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.