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5 Dividend Stocks Itching to Pay You More

Tickers in this article: M FDX GPS UPS MMM LO

While Gap owns its domestic stores, the firm opted to franchise its emerging market growth, taking considerable risk off of its balance sheet without precluding the firm from growth opportunities abroad. The firm also took the Great Recession as an opportunity to shore up its finances and restructure - that's helped shove net margins closer to double-digit range. Currently, the firm pays a 12.5 cent quarterly dividend for a 1.43% yield. That payout looks likely to increase in the next quarter.

Macy's M ChartM data by YCharts

Another retail name on our list this week is Macy's (M) . Despite challenging market conditions coming into play in the last quarter of 2012, Macy's is having a strong year - shares of the $15 billion retail chain are up close to 23% since the start of the year. Those returns are getting even bigger with Macy's 20-cent quarterly dividend payout - here's a look at why that 2.03% yield looks likely to increase...

Like other shopping mall anchors, Macy's struggled during the Great Recession as consumers traded down and sales suffered. But Macy's made more efforts to fix its model than most of its peers, improving its localized merchandising efforts and working on driving more traffic into its stores. A major restructuring dramatically reduced the firm's headcount and contributed to a return to profitability in recent years. More recently, the payoff has been incremental increases in same-store sales and margins.

With more than 850 Macy's and Bloomingdale's stores spread throughout the country, Macy's enjoys scale and brand recognition that smaller retailers lack. And its legacy stores in major U.S. cities boast some extremely attractive urban retail locations, like the firm's flagship store in New York City.

Lately, management has been prioritizing investors with its dividend, while at the same time boosting shareholder yield by cutting down its debt load. With few other capital needs, that frees up more cash for a dividend hike at Macy's.

Lorillard LO ChartLO data by YCharts

Last up is tobacco firm Lorillard (LO) , the number-three cigarette manufacturer in the U.S. News that the FDA was considering regulatory action against menthol cigarettes was a major black cloud for Lorillard, whose mentholated Newport brand contributes around 94% of sales for the firm. While those black clouds have dissipated a bit, investors are still a bit anxious about the potential for downside in LO.

As a sin stock Lorillard has some considerable advantages. For starters, it boasts a product with sticky customers, recession-resistant sales, and deep net margins. It also pays out a generous 5.47% dividend yield right now as a result.

While the domestic tobacco business is dying a very slow death, Lorillard's category is actually seeing some growth. Mentholated cigarettes have seen their share of the overall market slowly creep higher, offsetting the declining number of smokers in this country (Lorillard sold off the international rights to Newport in the late 1970s, so international growth rates aren't a consideration here). Because LO owns more than a third of the mentholated cigarette market, it's been benefitting disproportionately from that trend. With a strong balance sheet and excellent cash flow generation, the firm looks more than capable of offering investors a near-term dividend hike.