) -- You may have heard it before: Quality is leading in this market.
What it means is that big, blue-chip dividend payers are outperforming other stocks in this environment. In a sense, that's providing a performance double whammy for investors with exposure to quality stocks in their portfolios: They're collecting (relatively) hefty dividend yields, and they're laying claim to outsized capital gains as well. That's not hugely surprising, of course.
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With interest rates scraping historic lows, the yields being paid out by dividend stocks in this environment provide a major incentive to pile into income stocks. Couple that with a rally in 2013 that most investors still haven't bought into, and the result is an emphasis on quality in the middle of the second quarter. Utilities, consumer staples and telecoms are among the hottest performers on a relative strength basis as I write.
Looking back historically, that relationship of dividends and total returns ring pretty true.
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According to research from Wharton Professor Jeremy Siegel, reinvested dividends account for as much as 97% of total market performance. Better yet, dividends even impact how big your capital gains are. Over the last 36 years, dividend stocks have outperformed the rest of the S&P 500 by 2.5% annually, and they outperformed nonpayers by nearly 8% every year, all while paying out cash to their shareholders, based on data compiled by Ned Davis Research.
With companies sitting on record corporate cash and profits, it's going to be crucial to keep looking ahead for the companies most likely to dish out dividend hikes. In the past few months we've had some stellar success in finding future dividend increases just by zeroing in on a few key factors. Now we'll look at our crystal ball and try to do it again.
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For our purposes, that "crystal ball" is composed of a few factors: namely a solid balance sheet, a low payout ratio, and a history of dividend hikes. While those items don't guarantee dividend announcements in the next month or three, they do dramatically increase the odds that management will hike their cash payouts, especially as investors start to get antsy about whether or not 2013's rally will be able to hang on.
Without further ado, here's a look at
five stocks that could be about to increase their dividend payments
in the next quarter.
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