‘Dividend Achievers’ is the latest term used to describe the companies that have increased their dividend payout each year for the last ten or more consecutive years. You may have seen them referred to in the past as ‘Dividend Champions’ or ‘Dividend Aristocrats.’

The UK continues to be the home of stable, high dividend yielding stocks. Over the past year, despite the fact that 107 UK companies cut or cancelled payments, 342 firms increased or reinstated their dividends.

The future for UK dividends also looks bright, according to the latest Dividend Monitor from Capita Registrars. UK dividends soared to £15 billion in the first quarter of 2011, a rise of 10.3%, with an estimated full-year forecast of £64.2 billion. This is the fastest dividend growth since 2008, and occurred during a difficult macro-economic climate.

Dividends should be of paramount importance to the income-seeking investor, as companies that pay regular dividends tend to be in better financial health and produce sustained earnings and revenue growth. Companies that continue to raise their dividend payouts also raise their own performance expectations.

Dividends can also provide a glimpse into the management of a company, as each declaration represents a vote of confidence by the company’s board of directors.

Indxis has a strong record in the USA of providing tailored indices of top dividend achievers and qualitative analysis on which investors and fund managers can base investments. The company is now able to do the same in the UK.

The UK Dividend Achievers Index, launched last year by Indxis, produced an annualised return over the 12 months to January 31 of 20.85%, out-performing its MSCI benchmark by 2.96%. It also outperformed its benchmark by 0.92% over three years with annualised returns of 3.16%, according to back-tested data.

The index currently places household names such as Vodafone and BAE systems in the top 10 dividend yielding companies in the UK (4.8% and 4.6% respectively), which might not come as a huge surprise to investors. Interestingly, video game retailer ‘Game Group plc’ came in at the top with an impressive 8.3% dividend yield.

Forward-thinking investors should not search solely for high-yielding dividends, but seek out stable stocks like these with a high likelihood of annual dividend increases.

Despite the fact that a company may have made substantial payments over the previous year, this could be seen by some as an offer of compensation when its share price has fallen.

In addition, investors should create a diversified portfolio and look beyond investing in one or two big names. Situations such as the BP crisis in 2010 highlight the dangers and limitations of placing all of one’s eggs in one basket.

Dividends should not be overlooked by investors; they can provide a steady source of income when handled wisely, and with indices available to make this process clearer and easier, there has never been a better time to invest.