Analog Devices (NYSE: ADI) is sitting on top of the world today.

After a very impressive second-quarter report, Analog's shares set multiyear highs with a 50% one-year return including dividends. That's better than the returns from chief rival Texas Instruments (NYSE: TXN) and approaching the same market-stomping ballpark as Qualcomm (Nasdaq: QCOM).

The second quarter was both helped and hampered by the disaster in Japan: Supply lines and customers suffered, but nervous clients responded by stockpiling chips. All told, the puts and takes added up to about $20 million of additional sales, which was insignificant in the context of $791 million of total revenue.

Even if you exclude that $20 million windfall, Analog easily beat the $760 million top end of its own guidance. On the bottom line, the story remains the same: $0.75 on non-GAAP earnings per share left the $0.69 guidance peak far behind.

Gross margins set a company record at 67.6% thanks to higher factory utilization and a highly profitable product mix. Margins are expected to stay at that level in the coming quarter along with revenue guidance that surpassed expectations. Recent reports from large Analog customers Siemens (NYSE: SI) and ABB (NYSE: ABB) have shown double-digit increases in the component orders, which supports ADI's optimism and underscores its book-to-bill ratio above the crucial 1.0 mark.

And if all of that weren't enough to impress you, Analog also took this opportunity to increase its quarterly dividend by 14% to $0.25 per share. The annual yield now stands at 2.3% with an unbroken string of annual increases all the way to the company's first payout in 2003. Intel (Nasdaq: INTC) may be the king of semiconductor dividends, but Analog is making quite the case to income investors here.

All in all, Analog is riding the resurgent industrial markets like few other chip makers, leaving investors sated and smiling. Can the company keep this flawless execution going? The best way to find out is to watch the company like a hawk. Add Analog Devices to your Foolish watchlist, and you're well on your way.