Stock Quotes in this Article: AYR, BAC, DRI, ETE, GIS, HAR, WOR

 BALTIMORE (Stockpickr) -- The dividend hikes are continuing this week, piling total returns onto the stellar capital gains that closed out last week. That’s a good sign for income investors this summer -- total returns for dividend stocks have dramatically outpaced the broad market in 2011, and another week of hikes means that those return numbers are even more likely to shine this year.

One common misconception about dividend stocks is the idea that investors are giving up growth potential in exchange for cash payouts. The statistics show that’s simply not the case.

Instead of being mutually exclusive, dividends and capital gains actually go hand in hand. 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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    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, plus one other dividend payer worth taking a second look at.

    General Mills

    145 year-old food manufacturer General Mills (GIS) was one of last week’s dividend hikes of note. The company increased its payout to shareholders by 8.9% to a quarterly 30.5 cents per share. The move brings General Mills’ current yield to a very respectable 3.3%.

    Because it's a blue-chip food stock, investors aren’t overly concerned with General Mills’ fundamental health. That said, there’s a significant headwind that could cut into profitability. I’m talking about inflation. The recent commodity boom has sent input prices significantly higher in the last year or two, and the lag between what manufacturers pay now and what consumers will pay later can lead to serious margin squeeze. Commodity hedging and pushes to increase efficiency at General Mills should help combat inflation fallout and shield the company’s double-digit net margins.

    Even with those challenges, General Mills continues to operate at a high level. The company generates mountains of free cash each year, cash that the company uses to pay out its dividend. Consider this name a core dividend holding for 2011.

    General Mills, one of the top-yielding food and beverage stocks, shows up on a recent list of Jim Cramer's Safe Haven Stocks.

    Energy Transfer Equity

    2011 has been a strong year for shares of Energy Transfer Equity (ETE), a $10 billion limited partnership that has extensive natural gas operations. Units of the partnership have rallied more than 15% year-to-date, and the firm’s dividend payouts are massive. Last week, they become a bit more so thanks to what amounts to an 11.6% increase in its quarterly distributions, bringing ETE’s total annual yield to 5.56% right now.

    ETE’s natural gas operations consist of controlling interest in two subsidiaries, which store, transport, and process natural gas. Earlier this month, the company upped its bid for ownership of Southern Union (SUG), an $8.9 billion buyout offer than stands to dramatically increase the scale of ETE’s operations. In the meantime, analysts are anticipating massive improvements in ETE’s already ample distributions -- further increases that could provide current holders with an absurdly low cost-basis yield in the near future.

    It’s important to remember that ETE was designed to be a cash machine for unit holders. The company’s ownership stakes in its subsidiary businesses generate significant cash flow that should continue to balloon as management increases its scale. Investors looking to gain MLP exposure in their income portfolios should give this name a second look.

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    Darden Restaurants

    Casual dining giant Darden Restaurants (DRI) is the company behind a diverse group of restaurant chains that dot the country. Major names include everything from behemoths such as Olive Garden and Red Lobster to smaller concepts such as Bahama Breeze and Capital Grille. In total, the company operates more than 1,800 restaurant locations in North America.

    While Darden’s exposure to the casual dining business took its toll on shareholders during the depths of the recession, the firm was one of the best rebound stocks to benefit from increased consumer discretionary spending in 2009. Part of the reason for Darden’s elasticity is the well-defined nature of the firm’s portfolio of concepts. Olive Garden and Red Lobster are the jewels in Darden’s crown -- each is unique enough to continue to court consumers in this economic environment.

    Dividends have long been a priority for Darden management. Last week, they announced a 34.4% increase in their payouts to shareholders. That hike brings the firm’s quarterly dividend to 43 cents per share.

    Darden, one of the top holdings of Westport Asset Management, shows up on a recnet list of Cramer's Buying Opportunities.

    Harman International

    As a high-end audio equipment manufacturer, Harman International Industries (HAR) is another name that’s been largely beholden to consumer discretionary spending. The company owns a deep portfolio of audio brands -- including Harman Karon, Infinity, JBL, and AKG -- that are used everywhere from high-end home and car audio systems to professional concert installations.

    In a big way, Harman’s upscale positioning has been a benefit to it. That’s because as inflationary concerns take a bite out of middle class consumers’ buying power, wealthy shoppers haven’t slowed their spending in 2011. As a result, Harman has been able to increase sales to near pre-recession levels in the past two fiscal years.

    With only a 0.63% yield, Harman is far from a pure-play dividend stock. That said, a strong net cash position, valuable portfolio of brands, and modest dividend payouts do underscore this firm’s financial health. Management’s 300% dividend increase to 7.5 cents per share makes Harman the biggest increaser of last week.

    Harman shows up in the portfolios of Argonaut Capital and Robert Olstein's Olstein Financial Alert Fund.

    Worthington Industries

    Worthington Industries (WOR) is enjoying strong performance so far this year – shares of the small-cap metals processor have rallied more than 27% year-to-date. That stock performance has largely been predicated on fundamental performance in 2011. The company reported its best quarter of the year last week, besting analyst expectations and sending shares moving significantly higher.

    Management’s 20% dividend hike brings the company’s payout to 12 cents per share.

    Steel is Worthington’s bread and butter. The company buys steel from mills, then processes and manufactures products to meet the needs of customers in the automotive, energy, and agriculture industries.

    That does mean that Worthington is beholden to movement in steel prices, which could be a concern going forward. Still, a fairly strong balance sheet should mean that the company’s industry-leading dividend payouts should remain intact for the foreseeable future.

    Worthington is one of the top-yielding metals and mining stocks.

    Aircastle

    Aircraft leasing firm Aircastle (AYR) is another name that’s seen solid upside in shares so far this year. The firm’s stock has rallied 20% since the first trading day in January, added dividend returns notwithstanding.

    Last week, management announced a 25% dividend increase, which brings the company’s quarterly payout to 12.5 cents per share. That’s a 4% yield at current prices.

    Aircastle owns 136 aircraft, which it leases to firms in 36 countries. In addition, Aircastle is an aviation lender that makes aircraft-secured debt investments for airlines and private companies. That business layers a couple of levels of risk onto AYR’s balance sheet -- not only does the company deal with the ebb and flow of the aviation business, it also has to deal with the financial services pressures that other lenders face.

    This is a more speculative investment right now, but it’s one that could certainly pay off for hawkish investors.

    Bank of America

    The last stock we’re looking at today isn’t a dividend raiser at all -- but it’s an important payer that’s been getting plenty of media attention on its dividend. I’m talking about Bank of America (BAC).

    Bank of America has made significant strides toward fundamental strength in recent years. The company has retrained its sights on the retail banking business, opting to eschew more exotic revenue streams and generate profits from lending operations and fee-based services instead. That’s an admirable shift for the firm -- even if charge offs haven’t let the firm show its true earnings potential of late.

    The Fed ultimately has the final decision on any dividends Bank of America issues. Last quarter, Wall Street was shocked when the powers-that-be decided BofA wasn’t in a position to increase its payouts to shareholders. And right now, that doesn’t look likely to change from the Fed’s perspective. Analysts are expecting another 1-cent dividend to be declared on July 20 -- but investors willing to take on a speculative bent shouldn’t ignore the potential of this stock right now.

    Shares of BofA have gotten hammered in the last year, sliding double-digits as financial stocks lost favor. Investors who can hold on for the long-haul shouldn’t count this stock out. Wall Street thinks we’ll see a dividend hike by 2013; I’m inclined to agree.

    Bank of America shows up on recent lists of 5 Bank Stocks Analysts Are Downgrading and Top Stocks to Buy and Hold Through 2011.
    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.