There are a few Fools here in the office who lament our decision to not invest in Abercrombie & Fitch (NYSE:ANF) about a year and a half ago. I include American Eagle Outfitters (NASDAQ:AEOS) on that list as well, and I put it a bit higher up on the regret scale.

It's been plenty painful to watch American Eagle stock rise from less than $10 a year and half ago to just over $30 now. But today's announcement of an annual dividend increase from $0.20 to $0.30 adds insult to injury. That move raises the company's current yield up to just below 1%.

I imagine you're wondering why this guy gets so caught up in a 1% yield. Well, it's not the 1% yield that gets to me; it's the 3.3% yield I would be getting had I purchased shares when I was giving it consideration and the impact of my reinvesting those dividends going forward -- be it in American Eagle or elsewhere.

But let's ignore my oversight and take a look at the dividend itself. I estimate that with today's increase to $0.30 annually, the company is paying out only 17% of its free cash flow and only 29% of its average free cash flow for the past three years. In short, I wouldn't be surprised to see healthy annual increases in American Eagle's dividend in future years and a payout ratio that stays in control.

For an income investor considering American Eagle for its growing dividend and business, there are a few other retailers out there worth a look as well, such as Limited Brands (NYSE:LTD), Kenneth Cole (NYSE:KCP), and TJX Companies (NYSE:TJX). Although the yields aren't what you'll find in some other industries, having a small stake in retail does provide some diversification away from the industries where larger yields tend to live. And as I've learned with American Eagle, there's plenty of room for these payouts to grow.

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Nathan Parmelee does not have a financial interest in any of the companies mentioned. You can view his profile here. The Motley Fool has an ironclad disclosure policy.