Many investors love receiving dividends. They can provide a source of regular income, and historically, dividend-growing stocks have produced total returns that outperformed the S&P 500.

Naturally, stock selection matters. You want to pick companies that not only have relatively high dividend yields but also those with a history of increasing payouts. Then, investors should check to make sure the company has the ability to keep raising dividends.

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These two companies meet these criteria. With their stocks trading at reasonable valuations compared to the overall market, they are in good positions to provide market-beating returns.

It's time to delve into each company.

1. Home Depot

Home Depot (NYSE: HD) shares have gained 13.6% this year, lagging the S&P 500 by 6 percentage points at this writing. But that's due to the market's focus on short-term considerations.

Higher interest rates have hurt home sales (existing-home sales fell by 1% in September) and homeowners borrowing for major renovations. This comes on top of an already stretched consumer dealing with higher prices for everyday items.

These factors have caused Home Depot's sales to weaken. Fiscal second-quarter same-store sales dropped 3.3%. But diluted earnings per share, adjusted for certain items, were essentially flat, at $4.67 versus $4.68 a year ago. This covers the period that ended on July 28.

The housing market is cyclical, and when home sales pick up, new owners tend to do projects. Those who already own homes will also initiate major construction at some point out of necessity or just the desire to do upgrades. While the timing may prove challenging to predict, Home Depot, which generates the highest sales in the home-improvement retail sector, is poised to benefit by serving professionals and individuals.

Patient investors will receive a 2.3% dividend yield, about 1 percentage point higher than the S&P 500. The board of directors also has a history of annually increasing payments that goes back to 2010.

The company also generates plenty of free cash flow (FCF) to support dividends. During the first half of the year, its FCF was $9.3 billion compared to dividends of $4.5 billion.

The shares sell at a lower price-to-earnings multiple (P/E) than the S&P 500: 27 versus 29 for the overall market.

2. United Parcel Service

United Parcel Service (NYSE: UPS) shares have hit a snag due to higher inflation raising the company's costs, slower growth following the initial COVID surge, and other macroeconomic considerations. The stock has dropped a steep around 15% this year.