BALTIMORE ( Stockpickr) -- The combination of interest rates at all-time lows and dividend payouts at all-time highs is creating a pretty good time to be a stock income investor -- if only because other traditional income sources can't measure up.
Right now, U.S. firms hold around $2 billion in cold, hard cash. That's more of a problem than it may sound like. After all, management teams need to put that cash to good use (that is, with meaningful rates of return). That's a challenge in an environment where interest rates are effectively zero.
But dividend payouts provide a way for the C-suite to generate shareholder returns instantly with their cash. So U.S. stocks have been hiking their dividend payouts to catch up.Does a few extra cents each quarter really matter to your investment returns? You'd better believe it. >>5 Short-Squeeze Stocks Ready to Pop 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 three and a half decades, 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. In recent months we've had some stellar success in jumping in front of 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. 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. >>5 Must-See Charts to Trade for Gains Without further ado, here's a look at five stocks that could be about to increase their dividend payments in the next quarter.