Stock Quotes in this Article: DEI, HP, LTD, ROK, RY

BALTIMORE (Stockpickr) --Rough market performance is pushing investors to the dividend stocks this month, as major market indices such as the S&P 500 teeter just a few points from sliding into the red for 2011. While capital gains continue to pummel investors in June, dividend are looking considerably more auspicious this year. Already, dividend increases for the S&P in 2011 have surpassed those of last year, and strong company fundamentals should continue to mean hefty payouts for income investors.

While aggregate payouts still lag their pre-recession levels, market participants should remain cognizant of the fact that share prices do too. More significant is the yield impact from June’s more than 3% selloff; as prices fall with the broad market, yields increase, making dividend payers even more attractive than they were before.

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    And research points to dividend-payers’ ability to outperform on a capital gains basis in the long-term as well: 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.

    The numbers are even more compelling when looking at companies that consistently increase their payouts.

    That’s why each week, we take a look at the stocks that declared dividend increases the previous week. Here's a look at some of several stocks from our list of recent dividend-increasers.

    Rockwell Automation

    Industrial equipment maker Rockwell Automation (ROK) designs and manufactures tools and controls used to increase efficiency at factories. While shares have gotten knocked since last April, strong performance during the first quarter means that shares of Rockwell are still sitting on double-digit gains on the year. Last week, management increased its dividend by 21.4% to a quarterly 42.5 cents per share.

    Rockwell, one of TheStreet Ratings' top-rated electrical equipment stocks, has been shaking up its business of late, selling off its power systems unit to increase its focus on higher-margin factory automation sales. The results are already apparent in the firm’s customer Rolodex -- and its income statement. At present, the majority of Rockwell’s revenue still comes from the U.S., opening up sizable growth opportunities in emerging markets as factories seek to cut costs and increase efficiency of production.

    Financially Rockwell is an exceptionally healthy firm, with a solid balance sheet and enviable cash position. The company has a long track record of returning free cash to shareholders. As a result, ROK’s increased dividend payout should be safe for the foreseeable future.

    Limited Brands

    Niche retail player Limited Brands (LTD) is another stock that’s managed to eke out double-digit returns this year despite a noticeable downturn in share prices from mid-May. The company, which owns brands such as Victoria’s Secret, Bath & Body Works and Bigelow, sports a geographic footprint that’s 3,000 stores strong as well as well-established Internet and mail order sales channels.

    Last week, Limited Brands, one of the 20 highest-yielding dividend stocks, announced two dividends for shareholders: a regular 20-cent payout, as well as a $1 special cash dividend.

    That marks the second special cash dividend Limited Brands has offered up in the last year; $4 dollars in total. As a result, investors have seen a total return of 60.4% in the last year -- 24% of which comes from Limited’s dividend payouts. Much of Limited’s success comes from its domination of the corners of the specialty retail world that it operates. In Victoria’s Secret and Bath & Body Works, Limited lays claim to household name brands with significant brand cachet. As a result, it's able to take advantage of a stickier customer base, even when consumer purse strings get tightened.

    While Limited does carry a somewhat large debt load, the company generates ample free cash to cover any obligations that come due. With very high insider ownership of shares, expect increasing shareholder value to continue to be a core focus for management.

    Helmerich & Payne

    While Helmerich & Payne’s (HP) 0.45% yield hardly qualifies it as a core income play, the oil and gas drilling stock is nonetheless contributing to the statistic that payers outperform nonpayers; shares have rallied more than 29% since the first trading day of January, fueled by increasing prices for energy commodities in recent months.

    The firm is one of the largest land drillers in the country, with a more than 90-year track record contracting to drill for for oil and gas producers. H&P has enjoyed an outpaced growth rate in recent years, spurred on by the increasing viability of new oil and gas projects as well as a technological advantage from the firm’s FlexRig platform.

    Price volatility is something that investors will need to be aware of in this market. Because H&P’s share price trades more or less in-step with crude prices, volatile market conditions can mean quick share moves either up or down. A 16% dividend increase brings the firm’s quarterly payout to 7 cents per share – still, market conditions make that low payout relatively negligible.

    Douglas Emmett

    Douglas Emmett (DEI) is a residential and office building REIT that owns properties in Los Angeles County in California as well as Honolulu. Offices are the vast majority of Douglas Emmett’s revenue, with around 2,200 individual office leases making up approximately 85% total sales.

    While I like REITs as a way to build an income portfolio, there are some concerns to keep in mind for DEI. For starters, because the majority of the company’s properties are located in California, they’re subject to the downward pressures of the commercial real estate market right now. Normally, the real estate market isn’t a concern for a traditional office REIT, which signs long-term triple net leases with tenants -- but Douglas Emmett has a significant number of leases coming up for potential renewal in the next several years, which creates a concern for shareholders.

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    At the same time, profitability is tenuous for Emmett, which has had to outlay significant cash (and take on significant debt) to make acquisitions. While financial health is reasonable, there are other REIT alternatives that pay out a bigger yield to investors in this market.

    All of that said, current shareholders should be happy with the firm’s 30% increase, which brings quarterly payouts to 13 cents per share.

    Royal Bank of Canada

    Canada’s largest bank, Royal Bank of Canada (RY), increased its dividend outlay for U.S. shareholders in last week’s dividend announcement, hiking its payout by 8% to 54 cents per share. That latest increase pins the firm’s yield at 4% given current prices.

    RBC’s positioning as Canada’s largest bank gives it significant advantages in a market that’s already shown comparative strength over the U.S. banking environment. Canada has continued its focus on retail banking, eschewing exotic, higher-risk revenue streams in favor of building a deposit base and a complementary fee-based business that results in impressive customer stickiness.

    A solid balance sheet at RBC has been slowly improving as poor risks fall off, and new lending exhibits higher standards. As the Canadian dollar shows strength against the U.S. Dollar, expect the firm’s dividend payouts to rise in favor of stateside investors.

    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, Elmerraji 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.