Compound interest is when interest previously earned is added to the principle and is considered when calculating future interest – i.e. earning interest on interest. So, what’s more powerful than compound interest? Compound dividends! Compound dividends are like compound interest on steroids.

I had hoped to feature a few high-yield stocks raising their dividends this week.  Patiently I watched the news wire for some announcements that fit the bill. As if they were waiting for the cue, three high-yield stocks recently announced increased cash dividends for their shareholders:

In this environment many income investors are happy to see any dividend increase. Not all companies are hiding behind the economic downturn and short-changing their dividend increases. To the contrary, PetSmart (PETM) after an extensive analysis plans to significantly increase its dividend.

Some dividend stocks can be classified as champions. A bad economy, tight credit markets and a dark cloud of uncertainty are enough send some dividend companies running for the exit. However, these are the times that champions stand firm.