BALTIMORE ( Stockpickr) -- I know it's tempting, but don't make the mistake of ignoring dividends right now.
Yesterday, the Dow Jones Industrial Average and the S&P 500 simultaneously shoved their way to new all-time highs, a fact that's been slowly luring more and more retail investors to focus exclusively on capital gains. But history shows that eschewing dividends when stocks are rallying can be hazardous to your total returns.
How hazardous?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. >>5 Must-See Charts to Trade in April 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. >>5 Hated Stocks to Buy to Beat the S&P in 2013