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Dividend stocks can be the foundation of a great retirement portfolio. Not only do the payments put money in your pocket, which can help hedge against any dips in the stock market, but they're usually a sign of a financially sound company. Dividends also give investors a painless opportunity to reinvest in a stock, compounding gains over time.

However, not all income stocks live up to their full potential. Using the payout ratio -- i.e., the percentage of profits a company returns to its shareholders as dividends -- we can get a good read on whether or not a company has room to increase its dividend. Payout ratios between 50% and 75% are ideal. Here are three income stocks with payout ratios currently below 50% that could potentially double their dividend payments.

Johnson & Johnson

If you're looking for an attractive income stock with serious dividend growth potential, starting off with one of the most elite Dividend Aristocrats isn't a bad move. Healthcare conglomerate Johnson & Johnson (NYSE:JNJ) has increased its dividend for 54 straight years. You can count on two hands how many publically traded companies have a longer streak of increasing their annual payout.

What makes Johnson & Johnson a stock you can count on? For starters, many of its businesses cater to inelasticity. Consumers can't decide when they're going to get sick or what type of illness they'll come down with, meaning J&J's pharmaceutical, medical device, and consumer health products segment should remain busy regardless of how well or poorly the U.S. economy is doing. It also gives J&J quite a bit of pricing power in its pharmaceutical segment.

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Johnson & Johnson is also comprised of more than 250 subsidiaries. While J&J is a giant company with a $324 billion valuation, it's relatively easy for J&J to divest one of its cogs or add a new subsidiary without disrupting its larger business model. This allows J&J to constantly target faster growth opportunities, as well as forge collaborations to potentially boost its growth rate. Let's not forget that J&J's partnership with Pharmacyclics (now a part of AbbVie) allowed it access to blood cancer blockbuster Imbruvica, which could generate $7 billion or more in peak annual sales. It's possible that other partnerships could have healthy payoffs as well.

As icing on the cake, Johnson & Johnson also has one of two remaining AAA credit ratings from Standard & Poor's, implying the credit agency's full faith in J&J being able to repay its debt. With free cash flow tipping the scales at $15.8 billion in 2015, and an estimated payout ratio of less than 50% this year, Johnson & Johnson's $3.20 annual payout and 2.7% dividend yield look ripe for expansion in the years to come.

Bank of the Ozarks

Another company that income investors would be smart to keep their eyes on is Bank of the Ozarks (NASDAQ:OZK), a fast-growing regional bank that's often voted among the nation's top banks year in and year out.

The big concern for all banks at the moment is the Federal Reserve's ongoing dovish interest rate policy. Historically low lending rates have pushed net interest margins down and coerced banks to cut costs in order to boost their results. Bank of the Ozarks has had no such trouble, with the company delivering both organic and inorganic growth that would make even the most conservative investors blush.

In the second quarter, Bank of the Ozarks reported a 21.7% increase in net income and a 17.6% jump in adjusted EPS, all while its return on average assets fell 26 basis points to 1.91%. Mind you, most banks are trying their best to achieve an ROA of 1%, so 1.91% demonstrates just how effective Bank of the Ozarks is in generating income off of its assets.

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One of the biggest shots in the arm for Bank of the Ozarks comes from its M&A strategy. Just this summer Bank of the Ozarks closed its purchases of Community & Southern Holdings and C1 Financial, both of which are expected to be immediately accretive to its earnings. During Q2, Bank of the Ozarks recorded a 47.5% increase in total loans and leases and a 43.8% jump in deposits, mostly as a result of its aggressive expansion strategy, which is obviously working.

Perhaps the most impressive aspect of Bank of the Ozarks is its superior 4.82% interest margin and its annualized net charge-off for all loans and leases of 0.06%. No, that isn't a typo. The credit quality of Bank of the Ozarks' loan portfolio simply is that good.

With up to $3 in EPS projected by Wall Street in fiscal 2018 and a current payout of $0.64 annually (a 1.6% dividend yield), Bank of the Ozarks could wind up rewarding shareholders with big dividend hikes over the next five to 10 years.


Lastly, income seekers would be wise to consider SpartanNash (NASDAQ:SPTN), a food distributor and supermarket operator in the Midwest that primarily serves independent grocers, military commissaries, and exchanges.

As you might imagine, slow GDP growth in the U.S. has somewhat constrained SpartanNash's pricing power, causing the company's near-term sales and profit results to stagnate a bit. During the second quarter, the company announced that higher restructuring costs and asset impairment charges led its reported operating earnings down by 11% in spite of a nearly 2% increase in sales for the quarter.

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But SpartanNash has a few factors that should work in its favor over the long run. For instance, having a niche contract with the U.S. military to supply its commissaries should pay big dividends (pun intended) over the long run. The U.S. spends a small fortune on its military each year, and it's no surprise that SpartanNash has been able to take advantage of this fact. The company's military distribution operations provide its best margins.

Cost-cutting and M&A should also play a key role in SpartanNash's long-term success. The company is actively looking for ways to improve its supply chain in order to minimize its costs. For instance, the company recently consolidated its military and food distribution network at its Statesboro, Georgia warehouse, which should result in substantive savings going forward. Additionally, SpartanNash is looking for earnings-accretive acquisition opportunities, and is planning on rolling out new private-branded products that could boost its sales and pricing power.

Betting on food distributors may not be considered an exciting investment opportunity, but food is a necessity that typically holds up well even during recessions. With EPS growth likely to be in the mid-single digits and a $0.60 annual payout (good enough for a 2% yield), SpartanNash looks like a good bet to double its dividend sometime over the next decade.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.