2 Dividend Stocks with Growing Payouts

While dividend yields continue to be depressed due to rising prices in known income stocks, there are some stocks flying under the radar with good dividend prospects.  These stocks are frequently overlooked by income investors who are looking at the widely held blue-chip stock selections.  These companies continue to focus on growing their business in their core areas year after year.  Investors should take a look at these 2 companies that are producing excellent income growth and increasing dividends.

Calumet Specialty Products Partners (CLMT) is a master limited partnership and is a leading independent producer of high-quality, specialty hydrocarbon products in North America. Calumet processes crude oil and other feed stocks into customized lubricating oils, solvents, waxes and asphalt used in consumer, industrial and automotive products. Calumet also produces fuel products including gasoline, diesel and jet fuel.

Calumet is growing sales through business acquisitions including the recent agreement to acquire Royal Purple, Inc., a manufacturer of lubricants for automotive and industrial applications, for a total consideration of $335 million and an agreement to acquire Montana Refining Company, Inc. for aggregate consideration of $120 million.  Calumet is projected to have an earnings growth rate of 29% over the next 3-5 years.  Yet, Calumet is currently trading at a PE of 8.27 compared to the industry average of 13.

For the six months ended June 30, 2012, Calumet reported net income of $117.6 million compared to a net loss of $3.5 million for the same period in 2011.  We see specialty products sales increasing 13% to 14% in 2012, based on improving demand and contributions from recent acquisitions. We believe the partnership will benefit from the continued strength in the drilling fluid market, reflecting higher shale production.

On July 20, 2012, the Company declared a quarterly cash distribution of $0.59 per unit on all outstanding units or $35.9 million for the second quarter of 2012. This quarterly distribution represents an increase of 5.4% over the first quarter of 2011 and a 19.2% increase from the second quarter of 2011.

Calumet has a dividend yield of 9.1% and has increased its dividend 31% over the last 3 years.  Calumet has a 12-month price target of $30, a 15% increase from the current trading price.

Healthcare Services Group, Inc. (HCSG) provides housekeeping, laundry, linen, facility maintenance, and dietary services to nursing homes, retirement complexes, rehabilitation centers, and hospitals in the United States.  Healthcare Services Group, with a market cap of $1.43 billion, continues to grow revenues and income while increasing dividends each quarter.

Healthcare Services Group reported that revenues for the three months ended June 30, 2012 increased over 26% to$267,108,000 compared to the same 2011 period.  Net income for the three months ended June 30, 2012 increased 15% to $11,320,000 or $0.17 per share, compared to the 2011 second quarter.  Healthcare Services Group is projected to increase EPS 21% next year.

Healthcare Services Group increased its quarterly cash dividend to $0.16375 per common share. This represents the 37th consecutive regular quarterly cash dividend payment, as well as the 36th consecutive increase since the Company’s initiation of regular quarterly cash dividend payments in 2003.  Healthcare Services Group has a current dividend yield of 3.11% with a 5-year average dividend growth rate of 18%.

Healthcare Services Group has a 12-month price target of $24 based on projected EPS.  Healthcare Services Group has an equity summary score of 7.7 out of 10 for a Bullish outlook.