Income investors have favored dividend-paying stocks for a long time. And these investments have gained even more popularity in recent years due to extremely low interest rates. In a previous article, I examined three top-performing Dividend Aristocrat stocks of 2013. Today we'll focus on three more stocks that deserve honorable mentions.

Roll out the red carpet
Dividend Aristocrats adhere to the highest dividend-paying criteria. Companies in the exclusive group must boast 25 consecutive years of dividend increases. Here are some of last year's best performers.


Dividend Yield

Dividend Payout Ratio

5-Year Dividend Growth Rate

Cincinnati Financial

(CINF -0.46%)




Illinois Tool Works

(ITW -1.62%)




Franklin Resources

(BEN -3.31%)




Sources: Yahoo! Finance; The Motley Fool. 

All three companies returned respectable gains last year. Diversified manufacturer Illinois Tool Works' stock returned nearly 39% to shareholders in 2013. Meanwhile, financial-services stocks Cincinnati Financial and Franklin Resources returned 36% and 34%, respectively. By comparison, the S&P 500 grew roughly 29% last year.

A closer look
Property and casualty insurer Cincinnati Financial raised its dividend for a 53rd consecutive year last August. And its 46% payout ratio suggests the company can continue to raise its dividend in future years. Like most financial-services stocks, Cincinnati Financial took a big hit during the financial crisis, when its stock price was down more than 50%. But profitability has certainly turned around for the insurer. The company posted $131 million in net income for the third quarter, representing an 18% increase over the same period last year. 

Manufacturer Illinois Tool Works also faced challenges during the past several years, mostly due to its exposure to the construction and transportation industries, which were hit hard during the economic downturn. But this manufacturer boasts ample future growth opportunities. And with no more than 14% of company revenue derived from any single business segment, diversification will help the company ride out future bumps in the road.

Even though Franklin pays a modest dividend, it has increased its dividend more than 48% annually during the past five years. Also, its low payout ratio suggests the asset manager can raise its dividend in the future. But life's not all rainbows and unicorns at the California-based company. Like all active fund-management companies, Franklin faces heated competition from passively managed fund shops and exchange-traded-fund providers like BlackRock, Charles Schwab, and Vanguard. Net outflows of actively managed mutual funds have negatively affected managers like Franklin in recent years and will likely continue to do so.

No crystal ball
Don't bet on past performance to predict future results. Instead, focus on buying attractively valued companies that possess uninterrupted track records of not only paying dividends, but also growing them.