Dividend stocks yield some solid returns, but not all are created equal. As for Trivariate Research, its “winning formula” focuses on large-cap stocks that grow their payouts. In fact, dividends are a sustainable return factor for stocks, founder Adam Parker said in a recent note. He highlighted an “investable universe” of 479 stocks, a group that has outperformed the top 700 equities on both 25-year and five-year time frames. Stocks in this group have a market capitalization of at least $10 billion, a dividend yield either greater than 10 basis points and rising or greater than 50 basis points. The firm found that the average stock in this group currently increases its dividend by 5% each year. One basis point is equal to 0.01%. Breaking it down even further, Parker found that the quintile of stocks with the two lowest payout ratios have performed the best over the past five years and that dividend growth works best for high-cash and inexpensive companies. “Stocks with cash versus market cap. above 25% and net cash versus market cap. above 10% that grow their dividends extensively outperform stocks that have less cash.” Parker noted. Those that are cheap – meaning they are valued at less than 10 times price-to-forward earnings – and that also increase their payouts, tend to outperform more expensive, dividend-growing stocks, he said. Finally, companies with lower payout ratios that raise their dividends tend to have “stronger performance” than their industry group after the announcement, Parker said. Payout ratio is a measure of how much of a company’s earnings are paid out to its shareholders. Keeping in mind, he came up with a list of stock ideas for those raising dividends in the lowest quintile of payout ratios over the past few months. Here are some that made the cut. Synchrony Financial, which has a dividend yield of 1.58%, announced in April a 13% payout increase to 34 cents a share at the beginning of the third quarter. The company’s chief financial officer, Brian Wenzel, said in a statement that the increase, as well as a new share repurchase program of up to $6.5 billion, “reflects the confidence we have in our execution and the opportunities we see to continue to drive long-term shareholder value in the years ahead.” SYF YTD Mountain Synchrony Fiscal Year To Date Synchrony also reported adjusted first quarter earnings that beat expectations, but its revenue fell short. The stock is down about 11% year to date. On the other hand, the number of passengers has increased by 4% so far this year. The insurance stock yields 1.64% and recently announced a 14% increase in its quarterly dividend to $1.25 per share. This marks the 22nd consecutive year of growth and a compound annual growth rate of 8% over that period, Travelers said. In April, the company reported first-quarter revenue and core earnings per share that exceeded expectations. “Over time and across a variety of circumstances, we have delivered consistent growth and industry-leading returns with low volatility,” CEO Alan Schnitzer said in the earnings release. “That performance reflects the strength of our capabilities on both sides of the balance sheet and our focus on creating shareholder value.” In the end, Chubb also beat expectations when it was reported last month. Despite the results, stocks fell after the report as investors feared signs of softening in the property insurance market. The insurance company, whose stock has a dividend yield of 1.19%, announced in February it would increase its 33rd consecutive annual dividend to $4.08 per share, to be paid in four quarterly installments of $1.02 per share. The stock is up about 4% year to date.