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TheStreet Open House

5 Stocks Ready for Big Dividend Boosts

Stock quotes in this article: NAFC, SMP, ANDE, F, WU, CA

NEW YORK ( Stockpickr) -- The economic crisis of 2008 put a real scare into many companies. It was shocking to see business suddenly plunge, and the race began to make sure that enough cash was on hand in case it turned into an extended downturn.

As it turns out, the scariest moments were fairly short-lived, and many companies bounced back and quickly saw profits rise to fresh heights.

Still, many of these companies have taken a go-slow approach when it comes to dividend hikes. They've been authorizing modest increases in the dividend, but at a rate that is far slower than profits have been growing. As a result, the payout ratio (which is dividend payments divided by net income) remains extremely low for many companies. They are paying out 10%, 20% or 30% of their income in the form of dividends, but could easily afford payout ratios in the 40% to 50% range.

>>5 Stocks Setting Up to Break Out

History says they can do better. Wells Fargo calculates that companies in the S&P 500 paid out an average 53% of their profits in the form of dividends in the 30 years after World War II. That figure stands at 27% today. Back then the average dividend yield hovered in the 4% to 5% range. These days, we're talking 2.1%.

Software provider CA (CA) is a great example. Like other the technology companies, it never thought much about a dividend before, issuing a puny annual one of 16 cents. Well, it's just been super-sized to $1 a share (good for a 3.7% yield), and it could easily go to $1.50 a share in 2013 or 2014 and still represent a reasonable payout ratio.

Here's a look at five other companies that could be in for a huge dividend hike in coming years.

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