Stock Quotes in this Article: KMI MHP FAST OKE LLTC LNT

BALTIMORE (Stockpickr) -- Dividend hikes are continuing to trickle in at a faster pace this month, as earnings season heats up.

Not surprisingly, earnings and dividends go hand-in-hand -- not only do both tend to get announced at the same time during earnings season, corporate earnings also ideally provide the cash to pay out a firm’s dividend distributions. For those reasons, it’s no surprise that income investors are keeping a close eye on their portfolio holdings right now.

They have good reason to hope for significant dividend income growth in 2012. Last year, corporate dividend payouts grew by more than 16% -- an extra $50.2 billion in cash. With corporate cash holdings and profitability both at all-time highs, the environment is primed to provide even more dividend payouts. And while some investors think that dividend returns come at the cost of capital gains, the data show that it’s quite the opposite.

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    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.

    That’s why we pay close attention to the firms that are shoveling more corporate cash to shareholders each week. With that, here’s a look at six of the stocks that hiked payouts in the last week.

    Kinder Morgan

    It’s been a strong quarter for energy firm Kinder Morgan (KMI). Shares of the $27 billion firm have rallied more than 20% over those last three months. In essence, Kinder Morgan is a way to get exposure to the income streams of an energy MLP without the tax issues that can come from owning a partnership stake. KMI is a holding company that’s the general partner of Kinder Morgan Energy Partners (KMP), and has ownership interests in Kinder Morgan Management (KMR) and a significant number of natural gas pipeline assets.

    Kinder Morgan is also in the process of acquiring El Paso (EP), a gas transmission and exploration firm that should dramatically expand KMI’s scale and dividend generation abilities. To be sure, KMI’s strategy is as complex as its corporate flowchart is -- while the firm’s corporate structure does some good at simplifying things come tax time, it’s still far from straightforward.

    But it’s a structure that supports significant dividend generation. This week, Kinder Morgan announced a 3.33% dividend hike, bringing its yield to 3.63%. Investors looking for hands-off energy exposure should consider KMI as a core holding.

    McGraw-Hill Companies

    McGraw-Hill Companies (MHP) has gotten a lot of attention in the last year, and not the good kind. Much of it has come from the firm’s credit rating arm, Standard & Poor’s, which got much of the blame for exacerbating the financial crisis of 2008, and more recently for issuing what some perceive to be inconsistent, politicized sovereign debt ratings. Other MHP units include the firm’s namesake educational publishing arm and J.D. Power and Associates.

    In spite of the pressures on McGraw-Hill right now, the firm still has significant upside in the financial services space. Its S&P Indices unit (which is separate from the ratings business) provides some of the world’s most popular equity indices, and new product offerings are helping to dig a more competitive moat for the firm. At the same time, service-driven businesses like Capital IQ are offering up large recurring revenue streams for MHP.

    S&P ratings has mistakenly taken on the position of proselytizer on Wall Street, a move that’s alienating the firm’s ratings clients as well as the general public. The firm needs to show more public contrition and focus on improving the inconsistencies in its ratings process (perceived or otherwise).

    This week, McGraw-Hill announced a 2% dividend increase, bringing the firm’s payout to 25.5 cents per quarter. That makes 2012 the 39th consecutive year of dividend hikes for the firm, which currently yields 2.16%.

    Fastenal Company

    We’ve already talked this week about Fastenal Company (FAST). The industrial supply company’s 2,400 retail locations helped to make it one of the better retail short squeeze opportunities for 2012. On Tuesday, management announced a 21.4% dividend increase, bringing Fastenal’s total payout to 17 cents per quarter. That gives FAST a 1.49% yield.

    With a huge geographic footprint and a catalog that boasts more than 410,000 types of fasteners and more than 585,000 maintenance and repair products, Fastenal is better able to compete on cost and availability than most of its smaller peers. And because the firm controls a relatively small share of the highly fragmented industrial distributor market, there’s substantial room for growth in this business before it becomes saturated.

    Even though the firm’s 1.49% yield hardly makes it a core income holding, its short squeeze potential makes it worth watching this quarter.

    Oneok

    Oneok (OKE) has had a good year -- shares of the $9 billion energy company have rallied more than 53% in the trailing 12 months. The firm’s 8.93% dividend hike should help to add to those returns for shareholders. The dividend hike ratchets Oneok’s quarterly payout to 61 cents per share, giving the company a 2.53% yield at current price levels.

    Oneok is an integrated natural gas firm that’s involved in everything from producing to transporting and distributing natural gas and natural gas liquids throughout the U.S. While the freefall of natural gas prices in the last year has impacted the company in the last year, that integrated business model has helped to stave off the profitability squeeze that peers faced. As with Kinder Morgan, Oneok is the general partner for an MLP of similar name: Oneok Partners (OKS). The investment and tax implications of owning this corporation versus its MLP offshoot remain the same.

    This stock is a decent alternative for investors looking for energy exposure with income payouts. That said, Kinder Morgan’s heftier yield and payout growth rate make it the more attractive of the two.

    Linear Technology Company

    Analog chipmaker Linear Technology Company (LLTC) designs and manufactures the integrated circuits used by more than 15,000 manufacturing firms in their products. Because LLTC’s chips have applications in every industry from automotive to communications to industrial, the firm’s revenues are less susceptible to sector-driven headwinds than most other chipmakers.

    This week, management announced a 4.17% dividend hike, bringing the firm’s per-share payout to 25 cents per quarter.

    From a financial standpoint, Linear is in good shape. The company’s balance sheet has a deep net cash position and ample free cash flow generation should help to ensure that its dividend continues to be adequately supported for the foreseeable future. With a nearly 3% dividend yield right now, Linear is a good way to get tech sector income in 2012.

    Alliant Energy

    With dependable, recurring revenue streams and legal monopolies, utility stocks have a reputation for being income-generation machines. Alliant Energy (LNT) is no exception. This mid-cap public utility provides electric and natural gas service to more than one million customers in the Midwest -- and management announced a dividend hike this week.

    One of the few uncertainty factors for utilities is regulatory lag, the time it takes between a material change in commodity prices the firm has to pay to serve its customers and the point at which the firm is allowed to raise rates in kind. Lag is minimal in Alliant’s service area thanks to legislation that enables the company to pass on its commodity and transmission costs more quickly. Even though the utility business is capital-intensive, Alliant sports an adequately strong balance sheet and a historically strong level of dividend growth.

    Last Friday, Alliant Energy increased its dividend payout by 5.88%. That brings the firm’s dividend yield to 4.22% on the heels of a 45-cent per share quarterly payout.

    To see these dividend plays in action, check out the Dividend Stocks for the Week portfolio on Stockpickr. 



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    -- 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.