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It was a good week for dividend stock upgrades, which outpaced downgrades for the first time in recent weeks. We found eight dividend stocks with yields over 2% that were upgraded by investment firms. We have listed the reason for the upgrade and the price target if the analyst made it available. We found it interesting that two of these stocks have had recent dividend cuts, which we have pointed out below. We don't like investing in stocks with recent dividend cuts but these analysts believe there is still a good story behind each stock.

Microsoft Corp (MSFT)

Microsoft was upgraded by Argus from a Hold to a Buy on March 16, with a price target of $39 per share. Argus said the upgrade was based on the upcoming launch of Windows 8 in 2012. It is expecting Windows 8 to compete in both the PC and tablet markets. Microsoft has a dividend yield of 2.2% and a payout ratio of 26%, which are both dead on their five-year averages. The company has increased its dividend for six years and has a three-year dividend growth rate of 14.6%.

PF Chang's (PFCB)

PF Chang's was upgraded by Argus from a Sell to a Hold on March 15. Argus said it was upgrading the stock based on valuation. PFCB has a dividend yield of 2.4% and a payout ratio of 55%. The company started paying dividends in 2010 and has increased its dividend each year since.

Union Pacific (UNP)

Union Pacific was upgraded by Barclays Capital from Equal Weight to Overweight on March 15 with a price target of $133. Barclays said the upgrade was based on stable western coal fundamentals and solid pricing. UNP has a dividend yield of 2.1% and a payout ratio of 29%. The company has increased its dividend for six years and has a three-year dividend growth rate of 29%.

Invesco Mortgage Capital (IVR)

Invesco Mortgage was upgraded by FBR Capital from Market Perform to Outperform on March 15 with a price target of $19 per share. FBR said the upgraded was based on the company's stabilizing dividend and book value. IVR has a dividend yield of 14.3% and a payout ratio of 105%. Although the company has increased its dividend for two years if things continue as they are in 2012 the company will end up with an effective cut in 2012.

Aixtron (AIXG)

Aixtron was upgraded by Avian on March 14, from Negative to Neutral. Andrew Abrams said that he is calling the bottom in the LED industry. Abrams is basing his call on a review of prior cycle timelines and the supply chain. AIXG has a dividend yield of 3.2% and a payout ratio of 59%. The company pays one dividend annually and has increased its dividend for three years. It increased its dividend by over 400% in 2011.

American Capital Agency (AGNC)

American Capital was upgraded by JMP Securities from Market Perform to Market Outperform on March 12, with a price target of $31. JMP based the upgrade on valuation following last week's $2B follow-on equity offering. AGNC has a dividend yield of 17% and a payout ratio of 112%. The company recently cut its dividend by more than 10%.

Other Upgrades

We found three other dividend stock upgrades where the reason for the upgrade was not available. Apartment Investment and Manage (AIV) was upgraded by RBC Capital Market from Sector Perform to Outperform on March 13, with a price target of $30. AIV has a dividend yield of 2.1%. The company has increased its dividend for two years. Another upgraded was China Mobile (CHL), which was upgraded by HSBC Securities from Neutral to Overweight on March 12. CHL has a dividend yield of 3.4% and a payout ratio of 31%. The company has a three-year dividend growth rate of 4.5% and has increased its dividend for two years.

Source: 8 Dividend-Paying Stocks With Analyst Recommendations