It is well-documented that a significant portion of the historical equity returns are a result of reinvested dividends. Performance in any given year is driven by capital appreciation, but long-term returns are largely the result of reinvested dividends. It is important to note that you can reinvest dividends without participating in a formal DRIP plan. However, you can’t reinvest dividends unless the company pays them, and the really good companies increase their cash dividends each year.

Last week we saw only one company increasing its dividend. This week seven companies stepped up and rewarded their shareholders with higher cash dividends:

A. O. Smith ( ) is a manufacturer of electric motors and residential and commercial water heaters. This past week, AOS increased its dividend 2.6% to $0.195/ share.  The dividend is payable on August 17th to shareholders of record July 31st. AOS is a Dividend Achiever and has increased its dividend for 16 consecutive years. The current yield based on the new dividend is 2.29%.

Healthcare Services ( ) provides housekeeping, laundry, linen, facility maintenance and food services to hospitals and other health care facilities. Tuesday, the company raised its dividend by 6% to $0.19/share. The dividend is payable on August 7th to shareholders of record at the close of business July 24th. HCSG paid its first dividend in 2003 and has increased each year since then. The current yield based on the new dividend is 4.08%.

Harleysville ( ) is a Pennsylvania-based bank holding company, with total assets of $825.7 million at September 30, 2008. Wednesday, the company boosted its quarterly dividend 5.6% to $0.19/share.