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Dividend investing has turned out to be a predictable income stream generating strategy for investors. This strategy provides the potential to earn constant streams of income from a portfolio while benefiting from the long-term growth that these stable stocks offer. When many investors think of stable income, they normally think of fixed-income securities such as bonds. However, stocks can also provide a steady income by paying a solid dividend.

Sound dividend stocks are characterized by the existence of a strong business model and solid business strategy combined with a strong income statement, healthy balance sheet and massive cash flows to sustain dividends with price appreciation. Over time, these stocks can help lower the unpredictability of an investment portfolio. Low risk but far from stodgy, dividend paying stocks become highly valued assets among investment opportunities.

In this article, I pick three safe companies that offer consistently increasing dividends. All three have a solid business plans and have been generating massive returns for shareholders in a low interest rate environment. They are Leggett & Platt (NYSE:LEG), Mattel, Inc. (NASDAQ:MAT) and Orchids Paper Products Company (NYSEMKT:TIS). Let's examine each company's business model, strategy for future growth and financial situation to gauge their ability to sustain returns.

How Mattel is a Safe Investment

Mattel designs, manufactures, and markets a variety of toy products. The products include fashion dolls, infant and preschool products, toy cars, and electrical vehicles, among others. With the vision of creating the future of play, its objective is to grow its market share combined with continued improvement in its operating margins to create value for stockholders. To accomplish this, Mattel has been working on three strategies.

Its first strategy is to generate consistent growth by optimizing entertainment partnerships, continuing the momentum in its core brands, building new franchises, and increasing and leveraging its global footprint. The second strategy is to enhance operating margins by sustaining gross margins in the low-to-mid 50% range in the short term, and over 50% in the long term with cost-cutting initiatives. Finally, its third strategy is to generate large cash flows and continue its opportunistic, disciplined, and value-enhancing deployment.

With this strategy, Mattel has become one of the most broadly recognized toy brands on the globe. Its portfolio of brands and products are grouped in these categories: Mattel Girls & Boys Brands, Fisher-Price Brands and American Girl Brands. At the end of the recent quarter, Mattel generated strong operating results with sales growth across its worldwide portfolio of brands. It has been able to enhance gross margin and improved other selling and managerial expenses. Its top-line growth was at 6%, Gross profit at 53.8% and operating income at $528.2 million as compared to $487.4 million in the Q3 of 2012.

Strong top- and bottom-line growth enables Mattel to generate massive cash flows. For the trailing 12 months, its operating cash flows are around $1 billion, and free cash flows are standing at $814 million. At the moment, Mattel is offering a quarterly dividend of $0.36 cents/share. Its free cash flows are providing full coverage to its dividend as payments stand at only $479 million. The company has sufficient cash in hand to invest in growth opportunities and for share buybacks after paying dividends. The toy maker is also strongly working on share buybacks, which will further enhance its dividends and EPS.

How Orchids is a Safe Investment

Orchids manufactures bulk tissue paper, recognized as parent rolls and converts parent rolls into a range of tissue products, including bathroom tissue and paper napkins, paper towels, for the consumer and 'at-home' market. Its strategy is to expand its position as a low-cost provider of high-quality tissue products to the rising discount retail channel. Also, it is looking to leverage its competitive advantages to increase presence in the mid-tier and premium tier markets within the discount retail channel as well as other retail channels.

To accomplish this, Orchids is expanding product offerings through new product development along with offering continued high service levels and increasing total manufacturing capacity. Further, it is maintaining and strengthening core customer relationships combined with improving the product quality of a higher tier offerings. Additionally, the company is seeking to further expand its customer base in other retail channels with a view to improving operating efficiencies and reducing manufacturing costs.

This paper maker's business model is safe and simple. It purchases recycled fiber and bulk rolls and reprocesses them into finished products. With a simple business model and attractive business strategy, the company has been generating increasing sales year over year. At the end of the recent quarter, Orchids was able to increase sales by nearly 14%. It is operating under two segments, converted product and parent rolls. Its converted product segment has generated 24% growth during the last quarter, which is its main revenue generating segment. This segment contributes more than 90% of revenue to net sales. Last quarter, it has generated a record EBITDA of $6.9 million, an increase of 30% over the past year's quarter. The strong sales performance coupled with significant cost controls and lower fiber prices helped drive record profits.

The converted product business will further grow as it has the ability to manufacture a full spectrum of quality grades from the opening price point to premium tier, which is enhancing its ability to grow sales beyond market growth rates. Its solid top- and bottom-line performance increases its potential to generate more cash for future growth opportunities and for dividend payments. The company is paying nearly 80% of its income to shareholders in the form of dividends. It has started to pay a quarterly dividend in March 2011. Since then, it has increased its dividend by 250%. At present, Orchids offers a quarterly dividend of $0.35/share. I believe its strong dividends set to continue as the paper products maker has established a strong base of business for the coming year and continue to work on new business for 2014.

How Leggett & Platt is a Safe Investment

Leggett & Platt is an international diversified manufacturer that designs and produces a wide range of engineered components and products which can be found in many homes, offices, retail stores and automobiles. The company operates through four main business segments named Residential Furnishings, Industrial Materials and Specialized Products, and Commercial Fixturing & Components.

The diversified manufacturer has limited risk involved in consistently generating top-line growth. Diversification is a key factor for Leggett & Platt to generate consistently strong growth in both the top and bottom line. The company has adopted a solid business plan. As per the plan, in the first phase from 2008 to 2011, it has divested its low-performing businesses while focusing on improving margins and returns; and in the second phase, it is looking for growth through acquisitions. The company is actively seeking growth opportunities while maintaining screening discipline to enhance its industrial materials portfolio.

In the recent quarter, it acquired an aerospace tubing manufacturer based in France, producing roughly $40 million of annual revenue. In Q2 of 2013, it acquired a small U.K.-based aerospace tube fabrication business, and in the past year, it acquired Western Pneumatic Tube. With these acquisitions, Leggett & Platt has four companies that provide titanium, sub-assemblies for aerospace applications and nickel alloy and stainless steel welded and seamless tubing.

These acquisitions set Leggett & Platt on a winning streak with a strong competitive position in the higher return, higher growth aerospace market. Strong top-line growth is enhancing Leggett & Platt's potential to generate significant cash flows. Its cash generating potential enables it to make investments in growth opportunities while paying hefty dividends and working on a share buyback program.

For the full-year 2013, its cash from operations should again exceed $350 million and capital expenditures are expected to be approximately $85 million, producing free cash flow of $265 million. Its free cash flows provide complete protection to cover dividend payments, which are approximately $125 million for the full year. Its dividends are absolutely safe with strong growth potential to generate healthy cash flows. It's potential to generate massive cash flows have helped it increase dividends for 42 consecutive years with a compound annual growth rate of 13%. Going forward, the company has sufficient cash to invest in growth opportunities and for share buybacks after paying dividends.

Source: 3 Companies For Safe Investment