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Do you like the comfort that dividend income can bring? Do you follow the trends of smart money managers? We researched stocks with this in mind.

We started by looking for stocks with a return on investment (NYSE:ROI) above the industry average. The return on investment (ROI) is a popular measure of profitability. It is calculated by dividing net profits by total assets.

We took this a step further by looking for stocks that pay a dividend yield of at least 2%, but not higher than 7%. This allowed us to focus on names with a strong credit profile. We now have a list of dividend stocks with a ROI above industry average.

Finally, we researched their 13F's looking for those with bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to outperform into the future.

5 stocks met the criteria.

Interactive Chart: Press Play to compare changes in analyst changes over the last two years for the five stocks mentioned below.

Would you invest in these companies? Use this list as a starting point of your analysis.

1. Kronos Worldwide Inc. (NYSE:KRO): Engages in the production and marketing of titanium dioxide pigments in North America and Europe.

  • Market cap at $2.23B, most recent closing price at $19.21.
  • Net institutional purchases in the current quarter at 1.5M shares, which represents about 7.52% of the company's float of 19.95M shares. Top 2 holders of the stock are American International Group, and LSV Asset Management.
  • TTM Return on Investments at 21.21% vs. an industry average at 12.75%.
  • Dividend yield at 3.1%.

2. Quality Systems Inc. (NASDAQ:QSII): Develop and market health-care information systems.

  • Market cap at $1.09B, most recent closing price at $18.38.
  • Net institutional purchases in the current quarter at 2.9M shares, which represents about 7.26% of the company's float of 39.96M shares. The top 2 holders of the stock are Brown Capital Management, and Columbia Wanger Asset Management.
  • TTM Return on Investments at 19.73% vs. an industry average at 11.62%.
  • Dividend yield at 3.8%.

3. Ritchie Bros. Auctioneers Incorporated (NYSE:RBA): Sells various equipment to on-site and online auctioneers worldwide.

  • Market cap at $2.33B, most recent closing price at $21.88.
  • Net institutional purchases in the current quarter at 8.1M shares, which represents about 9.03% of the company's float of 89.67M shares. The top 2 holders of the stock are Burgundy Asset Management, and Royce & Associates.
  • TTM Return on Investments at 9.78% vs. an industry average at 4.65%.
  • Dividend yield at 2.3%.

4. Sturm, Ruger & Co. Inc. (NYSE:RGR): Engages in the design, manufacture, and sale of firearms in the United States.

  • Market cap at $990.38M, most recent closing price at $51.69.
  • Net institutional purchases in the current quarter at 2.2M shares, which represents about 11.88% of the company's float of 18.52M shares. The top 2 holders of the stock are Allianz Asset Management, and The Vanguard Group.
  • TTM Return on Investments at 39.34% vs. an industry average at 20.93%.
  • Dividend yield at 2.84%.

5. Spreadtrum Communications Inc. (NASDAQ:SPRD): Operates as a fabless semiconductor company that designs, develops, and markets baseband processor and RF transceiver solutions for wireless communications and mobile television markets.

  • Market cap at $710.99M, most recent closing price at $15.49.
  • Net institutional purchases in the current quarter at 6.0M shares, which represents about 17.26% of the company's float of 34.77M shares. The top 2 holders of the stock are FMR, LLC., and Waddell & Reed Financial.
  • TTM Return on Investments at 24.61% vs. an industry average at 10.14%.
  • Dividend yield at 2.2%.

* All accounting data sourced from Google Finance

Source: Institutions Are Buying 5 Dividend Stocks With A Higher ROI Than Industry Peers