Stock Quotes in this Article: GPS, TD, WMT

BALTIMORE (Stockpickr) -- Dividends have long been one of the most hotly contested elements of stock market analysis. While dividends were once thought of as one of the best ways for firms to return value to investors, it wasn’t but a decade ago in the tech boom of the late 1990s that they fell out of favor in place of higher capital gains in ballooning growth stocks.

Dividends became a major fan favorite again in 2008, however, as investors sought an alternative to the irrational behavior of the stock market.

Historically, dividend stocks have proven to be a wise choice. 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.

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    That said, not all dividend stocks are created equal. While that statistic applies to all companies that pay dividends, the companies that increase those dividend payouts over time are even better.

    That’s why, each week, we take a look at the companies that increased their dividend checks to shareholder in the last five trading days. Here’s a look at this week’s stocks with recent dividend increases.

    Gap Stores

    Even if 2011 has sent shares of Gap Stores (GPS) off to a relatively slow start, this apparel stock still has considerable tailwinds that investors should be paying attention to. With consumer confidence still enjoying an uptick -- and spending climbing in kind -- Gap should see a continued rebound in its core demographic customer. And now, the firm’s 12.5% dividend hike last week brings its current annual yield to 2.1%.

    Gap was one of the pioneers of the specialty retail apparel format in the 1990s, an age advantage that makes this stock mature enough to have learned from its mistakes. And as long-time holders of Gap stock can likely attest, make mistakes this stock did. In the years leading up to the recession, the firm had already began moving its focus from the lucrative, middle class demographic to emulate teen brands that were raking in massive revenue growth in the mid-2000s. By the time management caught the error of its ways, we were already knee-deep in recession.

    In 2011, this stock now looks well suited to succeed again. With a portfolio of leading brand names, a more spend-happy customer, and a newly debt-free balance sheet, the Gap of today is leaner, meaner, and better able to compete than its predecessor ever was.

    Major holders of Gap as of the most-recent period include Eddie Lampert's ESL Investments, which initiated a new 2.8 million-share position in the stock in the most-recent quarter, and Steven Cohen's SAC Capital, which increased its Gap position significantly to 6.34 million shares.

    Wal-Mart Stores

    Wal-Mart (WMT) may be another retail power, but it has little else in common with Gap. Wal-Mart’s massive scale means that it’s able to operate at incredibly tight efficiencies, an attribute that all but guarantees the Bentonville, Ark.-based company’s spot as a bargain seekers' paradise. A 20.7% dividend increase makes this stock an attractive option for income seekers as well; the 36.5-cent quarterly payout puts Wal-Mart’s current yield at 2.8%.

    It’s hard to get a handle on Wal-Mart’s total size. The retailer currently accounts for somewhere in the realm of 10% of total U.S. retail sales, a mind-blowing figure that also speaks to the saturation of the domestic big-box retail market. To keep pace with investors’ huge growth appetite, management has set their sites overseas both with acquisitions and with completely new ventures.

    China has long been perceived as one of Wal-Mart’s most exciting markets both because of its Wal-Mart-sized population and consumers’ embrace of the big-box format. That said, emerging markets still have a long way to go before they’re as significant to Wal-Mart’s top line as its 3,800 U.S. stores. With competition consistently fierce in the discount retail space, the company will need to keep innovating domestically to stay atop its throne.

    Wal-Mart has attracted the attention of some high-profile investors, including Warren Buffett, whose Berkshire Hathaway maintained a 39 million-share position in the stock in the most-recent quarter, and George Soros' Soros Fund Management, which increased its position significantly in the quarter to nearly a million shares. Wal-Mart is one of the highest-yielding retail stocks.

    Toronto-Dominion Bank

    Hiccups in U.S. banking this year haven’t been quite so violent to the north. Take a look at shares of Canadian banking giant Toronto-Dominion Bank (TD), for instance. Shares of the firm have already rallied more than 14% in 2011. Last week’s 8.2% dividend increase ratchets the firm’s dividend yield up to 3.19%.

    The second-largest bank in Canada, TD also owns significant banking operations here in the U.S. Both operations benefit from relatively strong financial health and the scale of a financial institution with TD’s balance sheet. While many banks are opting to reduce their exposure to riskier ancillary revenues streams, TD has embraced fee-based services like its wealth management arm, which currently contributes more than 10% of the firm’s bottom line. That’s an attractive business to own right now -- one without many of the inherent conflicts that got so many other banks in trouble in recent years.

    To be sure, TD deals with many of the same capital problems seen by other large banks right now. While those aren’t life-threatening by any means at this point, investors would do well to be aware that their stakes in banks like TD are far from riskless. That said, the company should be more than able to keep up its dividends in the near-term.

    With a B- buy rating, Toronto Dominion is one of TheStreet Ratings' top-rated diversified financial services stocks.

    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, author had no positions in stocks mentioned.
    Jonas Elmerraji, based out of Baltimore, 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.