Costco (NASDAQ:COST) runs one of the most successful retailing businesses around, but its dividend won't excite income investors. At current prices, shareholders are signing up for a 1% yield -- far below the broader market's 2.2% payout.

Cost

Image source: Costco.

Costco's management also sets aside less than a third of its annual earnings as dividends, choosing instead to rely on unpredictable, lump-sum payouts like last year's $5 per share surprise. That quarterly commitment trails most blue chips, which tend to pay about half of their profits out in dividends.

So today I'm looking at three national retailers, Home Depot (NYSE:HD), Wal-Mart (NYSE:WMT), and Target (NYSE:TGT), that all sport stronger dividends than Costco. If you're an income investor looking for a higher payout than the warehouse retailer promises, these stocks might be worth adding to your watchlist.

Here's how the dividends stack up against each other:

 

Costco

Home Depot

Wal-Mart

Target

Yield

1%

1.9%

3.1%

3.2%

Last Raise (Percent Change)

$0.05 per share (+13%)

$0.12 per share (+26%)

$0.04 per share (+2%)

$0.04 per share (+8%)

Payout Ratio

29%

42%

42%

47%

Source: S&P Capital IQ data.

Home Depot's surging profits
Home Depot's yield isn't far ahead of Costco's, but that's partly because the stock has performed so well over the last few years. A strong rebound in the home improvement market has powered significant sales and profit gains, leading to a 234% share price leap in five years.

The home improvement giant is one of the few national retailers that's in Costco's league in terms of market-thumping popularity. It posted better than 4% customer traffic gains last year, which was right on par with Costco's stellar growth.

Yet Home Depot's business model has more room for boosting profitability; its operating margin has doubled from a housing crises low to pass 13%. Meanwhile, Costco's has stayed at roughly 3%.

HD Operating Margin (TTM) Chart

HD Operating Margin (TTM) data by YCharts.

Thanks to those surging profits, and a commitment from management to deliver 50% of earnings back as dividends each year, Home Depot income investors can expect another big dividend raise in 2016.

Wal-Mart's unusually high yield
Wal-Mart's massive yield makes it one of the top dividend stocks in the Dow, thanks mainly to the fact that it was the single worst-performing member of the blue-chip index last year. The retailing titan is struggling to post even minor customer traffic gains these days, and profits are headed sharply lower as management ramps up investments in the business.

Yet the pessimism surrounding those negative trends has provided income investors with a rare opportunity to own the nation's largest retailer at a better-than 3% dividend yield.

WMT Dividend Yield (TTM) Chart

WMT Dividend Yield (TTM) data by YCharts.

With profits likely to be pressured at least through 2017, the bad news is that investors can't count on that dividend growing quickly. In fact, they should brace for the next few raises clocking in at something close to last year's tiny 2% boost.

Target's growth opportunity
For a high-yielding retailer with stronger profit growth prospects than Wal-Mart, income investors might consider Target. The company's earnings suffered under the weight of its doomed Canadian expansion, which forced it to suspend stock repurchase spending for nearly two years. The dividend marched higher even through that financial shock, though -- more than doubling since 2010.

TGT Dividend Chart

TGT Dividend data by YCharts.

Like Wal-Mart, Target is prioritizing initiatives to engage its customers online while also pouring money into improving the in-store shopping experience. These are major challenges for any retailer hoping to stem the tide against surging e-commerce sales.

One of Target's key competitive advantage involves what management calls its signature categories, or product lines like baby, beauty, apparel, and wellness, that rivals can't replicate. These categories carry higher profit margins and are growing at a faster pace than the rest of its business. If Target can keep that encouraging trend going, its customer traffic and profit growth trends will likely outpace those of rivals, funding healthy dividend hikes over the next five years.

Demitrios Kalogeropoulos owns shares of Costco Wholesale and Home Depot. The Motley Fool owns shares of and recommends Costco Wholesale. The Motley Fool recommends Home Depot. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.