Stock Quotes in this Article: CSX, HOG, LM, MAR, PEP

 BALTIMORE (Stockpickr) -- Dividend stocks had another strong week last week, with dozens of firms announcing dividend payouts or increases timed around their earnings releases for this quarter. While the market isn’t currently reflecting the fundamental outperformance stocks are showing this earnings season, investors are turning to dividend-payers to get gains out of their portfolios.

With 2011 shaping up to be the biggest year for dividends since before the market crash of 2008, it makes sense to take a look at what dividend stocks are offering. That’s because, contrary to popular belief, dividend payouts and capital gains aren’t mutually exclusive.

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    On a total return basis, dividend stocks significantly outperform their non-payer peers as a whole. 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.

    We regularly take a look at income stocks paying out cash to investors. With that, here’s a look at five dividend stocks that raised their payouts last week.

    PepsiCo

    With shares returning approximately the same performance as the S&P 500 so far this year, 2011 has been a fairly standard environment for shareholders of PepsiCo (PEP), one of TheStreet Ratings' top-rated beverage stocks. But there are a handful of reasons why investors should be paying close attention to this food and beverage giant. Last week’s 7.3% dividend increase adds yet another to the list.

     

    Not content to constantly compete head-to-head with league leader Coca-Cola (KO), PepsiCo’s management team made the decision long ago to expand the firm’s reach beyond beverages. Today, the company owns some of the world’s most recognizable snack food brands, including Frito-Lay, Gatorade and Quaker. Because distribution channels for its food lines are nearly identical to those of its beverage business, it’s no surprise that the exposure to the food business was a good fit.

    More recently, PepsiCo has been working at streamlining its operations, buying its biggest North American bottlers to gain control over another element of its product. PepsiCo’s latest dividend increase brings the firm’s total yield to 2.94%.

    Pepsi shows up on recent lists of Cramer's Consumer Staple Winners and 8 Stocks Morgan Stanley Is Betting On.

    CSX

    Once considered a vestige of the past, railroads have been the subject of increased investor interest in recent years. One of the most interesting is CSX Corporation (CSX), a $29 billion railroad that owns a 21,000 mile rail network serving much of the East Coast, and one of TheStreet Ratings' top-rated railroad stocks. Last week, management announced a 38.5% dividend increase that brings CSX’s quarterly payout to 36 cents per share, a 1.82% yield at current price levels.

    A great deal of the renewed interest in railroad stocks has come as a result of climbing oil prices. While trucking (the biggest alternative to rail freight) is generally a more simple solution for a distribution chain, it’s also more expensive. As long as those added costs remain immaterial, trucking maintains the edge, but when rising oil costs push the cost of transportation too high, rail becomes an attractive alternative for transporting freight.

    Because rail shipments can be more than three times more cost efficient per ton, there’s considerable incentive for increased rail volume when oil prices are rallying. CSX has been transforming itself considerably in the last few years, improving efficiency and digging out much deeper margins. Investors will be the biggest beneficiaries of that change given CSX’s habit of returning value to its owners.

    CSX was recently highlighted in "Oil's Impact on 5 Transport Stocks."

    Legg Mason

    Baltimore-based Legg Mason (LM) is one of the biggest asset management firms in the country, with more than $670 billion in assets under management. Even so, Legg Mason is facing some significant challenges as it works to “turn the ship around,” putting a plug in the hull to stop investment outflows and finding a sustainable way to bring new assets aboard.

    With a team of managers who had vastly outperformed the market for decades, Legg Mason was one of the most storied firms in the industry leading up to the recession. But 2008 changed everything, bringing about surprisingly bad underperformance from LM’s star managers and an exodus in AUM from institutional and retail investors. The company has managed to drastically slow outflows since 2008, bringing them near zero in their latest quarter.

    Because recovery is so fresh for Legg, now could be an excellent time for a starter position in the firm. While 2011 hasn’t been particularly strong for shares of the firm, management’s history of returning value to shareholders shouldn’t be ignored right now. This past week’s 33.3% dividend hike shouldn’t either -- the move brings Legg Mason’s current yield to 0.91%.

    One recent big bet on Legg Mason comes from Mario Gabelli's Gamco Investors, which had a 3.1 million-share position in the stock as of March 31.

    Marriott International

    For hotelier Marriott International (MAR), a tough travel industry has been somewhat mitigated by the firm’s decision not to own most of the properties that fly under its flag. That’s because the firm’s less-capital-intensive structure means that there are fewer bills to pay when times are tough.

    One bill that did increase last week was the firm’s dividend payout -- management boosted the payout by 14.3% to a quarterly 10 cents per share.

    Even though Marriott doesn’t own most of its properties, the firm’s impressive economic moat means that it will continue to thrive in this market nonetheless. With solid hotel names such as Marriott and Ritz-Carlton in its portfolio, this chain has the brand power to court independent property owners who are looking for alternatives to their own management. As travel spending continues to perk up, expect Marriott’s market positioning to give it outsized performance enhancements.

    Harley-Davidson

    Iconic motorcycle brand Harley-Davidson (HOG), one of the 20 highest-yielding automotive stocks, has been undergoing a sort of rebirth in the last couple of years. With credit markets un-seized and consumer spending on the uptick, the stars are aligned for an increase in motorcycle sales this year.

    That’s a very good thing for Harley, a firm that’s had no shortage of challenges during its 108-year history. And it could be an even better thing for shareholders of the company.

    Because of its icon status, Harley lays claim to impressive revenue streams from brand licensing and other secondary sources, but despite its popularity, the key to this stock’s long-term success remains selling bikes. To that end, the firm has worked to provide new offerings to younger motorcycle enthusiasts who previously weren’t part of the company’s now-aging core demographic. The strategy appears to be working, with modest top line growth in fiscal 2010.

    Last week’s 25% dividend increase brings Harley-Davidson’s quarterly payout to 12.5 cents per share.

    One big bet on Harley-Davidson comes from Chris Davis' Davis Selected Advisers, which reported a 21 million-share position as of the most recent quarter.

    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, 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.