Stock Quotes in this Article: O, STT, WSM

BALTIMORE (Stockpickr) -- Dividend increases continue to trickle out this week, with 17 companies announcing increased shareholder payouts, two fewer than last week. But the slowdown has a lot more to do with the earnings calendar than it does with the current economic outlook. With the next cycle of earnings set to kick off in mid-April, investors should expect another accelerated round of dividend hikes to be forthcoming.

That’s not to say that this week’s dividend increases aren’t significant; with some major banks among the ranks of dividend raisers, this quarter marks one of the biggest paydays for investors who’ve held out since the market rockiness of 2008.

Why are we so concerned with dividends? Simple: These investments significantly outperform the rest of the market both in terms of income and capital gains.

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    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. 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 Friday, we take a look at the companies that increased their dividend checks to shareholder in the last week. Here’s a look at this week’s stocks with recent dividend increases.

    State Street

    The biggest dividend hike last week, by far, came from State Street (STT). The $22 billion banking giant increased its dividend payout from 1 cent to 18 cents -- a 1,700% increase.

    As with other banks that took rescue cash from the government, State Street’s dividend was subject to approval from Uncle Sam before it was authorized. The fact that such a large dividend was greenlighted speaks volumes about the bank’s current financial situation; it wasn’t long ago that State Street faced significant balance sheet instability. Today, 70% of the company’s revenues come from fee-based services, a much more attractive revenue stream for today’s banks.

    The jewel in State Street’s crown is its asset management arm, which has long been a major player in the institutional investment world. The division handles active management of client accounts, administration of custodial accounts, and is taking an increasingly large role in the exchange traded fund market. As banks look to diversify their interests to higher margin businesses, expect them to attempt to emulate State Street.

    State Street shows up on recent lists of 10 Liquid Bank Stocks With the Most Price Upside, 40 Stocks Analysts Are Insanely Bullish About and 5 Big Bank Stock Buybacks.

    Williams-Sonoma

    Williams-Sonoma (WSM) has been a major beneficiary of the post-bottom increase in consumer spending that took hold in 2009 and 2010. Now, with the economy looking brighter than before, this stock looks poised to continue its successes in 2011.

    Shareholders agree -- the company’s stock has already posted double-digit gains year-to-date. Now, a 13.3% dividend increase is tacking on income to that number.

    That’s not to say that company management is of the same view. The home furnishing execs expects several years of continued rough sales numbers and contracted margins. Of course, that bleak outlook is likely a very good thing for investors as Williams-Sonoma slashes costs to expand its profitability in anticipation of a prolonged recession. If sales data continues to be positive, then the company will only post even better fundamentals.

    As a home furnishings company, Williams-Sonoma’s fate is inexorably tied to that of the housing market. Even so, the degree to which the two are beholden to each other is likely being overblown by analysts. As housing continues to struggle, expect consumers to go after the new kitchen accessories instead of the new kitchen.

    Realty Income

    More directly tied to real estate prices is Realty Income (O), a $4.3 billion REIT that owns more than 19 million square feet of leasable retail space in the U.S. Even though its properties constitute Realty Income’s primary asset, this stock is actually significantly less exposed to the ebb and flow of the real estate market than many investors realize.

    That’s because the company’s properties generate revenues that are nearly independent of what happens to property prices. That’s possible because of the long-term, triple-net leases that generally last around 20 years and keep Realty Income free of any other variable expenses such as property taxes or maintenance. As a result, this stock has an incredibly predictable income stream that’s passed on to investors in the form of dividends.

    Most crucial for Realty Income Corp. is the trust’s occupancy rate. Despite pressures from the economy, the number of tenants in place has remained very strong for Realty Income. With available space and annual turnover both beating the industry average, investors should expect this REIT’s payouts to continue. A 0.3% dividend boost brings its quarterly payout to shareholders to 14.46 cents per share, a 5.04% yield at current price levels.

    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.