BALTIMORE (Stockpickr) -- These five stocks are about to boost dividends. They just don't know it yet.

A new earnings season is just a week away, kicking off on July 9 with Alcoa's ( AA) second-quarter earnings call. Earnings are a big deal for dividend investors -- after all, earnings releases are the most natural time for companies to announce their dividend hikes for the coming months.

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This quarter, a slew of firms are likely to post bigger dividend payouts, and investors who buy ahead of time stand to benefit in a big way. That's why it's time to take a look ahead to what's in store for next earnings season.

Investors have taken on a renewed interest in the last couple of years, after being unceremoniously reminded in 2007 and 2008 that those quarterly checks contribute a whole heck of a lot of Mr. Market's historical returns. According to research from Wharton Professor Jeremy Siegel, reinvested dividends account for 97% of total market performance. So, it shouldn't be a big surprise that finding dividend increasers is a big priority.

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Today, we'll look into the crystal ball to try and find firms likely to hike their payouts in the quarter ahead.

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 two, they do dramatically increase the odds that management will hike their cash payouts, especially as investors start to get antsy about this 2012 rally.

Without further ado, here's a look at five stocks that could be about to increase their dividend payments in the next quarter.

Republic Services

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First up on our list is a garbage stock. And I mean that in the best way possible. Republic Services ( RSG - Get Report) is the number-two waste management company in the U.S., operating 343 trash collection subsidiaries as well as close to 200 active landfills. Like bigger peers, Republic has also dipped a toe into projects that convert trash into energy.

The garbage business is typically considered recession-proof -- and while that's not strictly the case, it is fairly recession resistant. Consumers need to get rid of their trash whether the economy is struggling or whether it's chugging along, and that's good for Republic. The trash business is profitable, with RSG churning out net margins in the high single-digits. Those margins could improve more in 2012, as some of the firm's bigger input costs (namely fuel) drop this year.

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Financially, Republic is in decent shape. While the waste disposal business is capital intense (a single new garbage truck can cost more than $250,000 for example), the firm's operations throw off plenty of cash to cover interest payments and dividend hikes.

Currently, the firm pays out a quarterly 22 cents per share, a 3.46% yield. But I think it's about time for a dividend hike. Investors should watch RSG's second-quarter earnings call at the end of July.

Republic Services shows up on a recent list of 10 New Stocks on All-Star Fund Managers' List.


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Uniform rental firm Cintas ( CTAS - Get Report) ebbs and flows with the health of the jobs market. For that reason, revenues have been doing a lot more ebbing than flowing in the past few years. Still, with the labor market slowly turning around, that could soon be changing for Cintas -- sales bottomed in fiscal 2010 before turning higher last year. And so far, 2012 looks like another growth year for the firm.

Cintas is the league leader in the uniform rental market, providing uniforms for employees at more than 900,000 businesses. From fast food restaurant and hotel employees to factory workers, more than five million people go to work each day wearing Cintas' uniform products. By renting and maintaining uniforms, Cintas' customers save money and effort on their peoples' uniform costs, and the firm has the opportunity to up sell add-ons.

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In the past few years, Cintas has expanded its offerings by adding document management and destruction services to its lineup. The document businesses add an attractive and profitable niche to Cintas' capabilities, but they're just as beholden to the labor market as the uniform business, so revenue diversification isn't really there.

Cintas has a solid balance sheet, with around $450 million of cash and investments. Like Republic Services, Cintas operates in a capital-intense industry -- but liquidity is minimal on CTAS' balance sheet, and the firm generates plenty of cash to generate bigger dividends right now.

Presently, Cintas' annual dividend stands at 54 cents, a 1.44% yield. I think that the firm has room to hike its payouts for 2012.

Maxim Integrated Products

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Integrated circuit maker Maxim Integrated Products ( MXIM - Get Report) is another name that I see likely to hike payouts in the next quarter. The firm's dividend currently stands at 22 cents per quarter -- that's a 3.53% yield. Even though Maxim's payout puts it on the high end for a technology firm, the company looks ready to hike its payout in the next quarter or so.

Maxim's bread and butter is analog circuits, which help to process analog signals. For that reason, Maxim is a big manufacturer of mobile phone components and other communications hardware, as well as a big maker of power management chips. Maxim's chip design experience gives it a big advantage in the industry. As OEMs look for suppliers that can conform a chip to their applications, specialized firms such as Maxim offer solutions that less savvy or customized chipmakers can't.

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Financially, Maxim is in stellar shape, with a deep net cash position on its balance sheet and an income statement that's shown stair-step top- and bottom-line growth since 2009. For income investors looking for tech exposure, you could do a whole lot worse than Maxim.

Norfolk Southern

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Along with the rest of the transportation sector, $23 billion railroad Norfolk Southern ( NSC - Get Report) is having a fairly tepid year in 2012. Shares have slid more than 3% on the year as tempered freight volumes and low fuel prices in the first half of the year weighed on profitability. Still, the fundamentals haven't justified the selloff in NSC -- and the firm's 47 cent per share quarterly dividend could be on track for an upgrade in 2012. Right now, NSC yields 2.68%.

Even though fuel prices impact how much it costs to run NSC's trains, the firm wants $100 oil. That's because rail transport firms are competing with trucking companies for freight shipping dollars -- and with rail transport dramatically more efficient than a diesel-hungry big-rig, high oil prices give NSC and its peers a competitive advantage.

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High commodity prices in general are good for NSC. Since its biggest customers are coal mines (and others are metal miners and agricultural firms), higher commodity costs mean that there's more room in customers' margins for shipping costs. While the commodity pullback in the past few weeks has been painful, it's not likely to last in perpetuity.

And Norfolk Southern is in good financial shape. The company has more than $3 billion in cash and investments sitting on its balance sheet, offsetting around half of its long-term debt load. Excellent free cash flow should help to support a dividend hike for NSC this year. Watch out for second quarter earnings late next month.

As of the most recently reported quarter, Norfolk Southern was one of Wintergreen Advisors' holdings and also showed up in Bridgewater Associates' portfolio.


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Mid-cap energy transmission company ITC ( ITC) is the last name we're looking at today. ITC is an energy infrastructure firm that provides more than 25,000 megawatts of transmission capacity to its customers in the Midwest.

Historically, ITC has been a short target, in part because of the fact that energy infrastructure is a costly business to upkeep. Even though there's still plenty of short interest, the weak-handed bets have already been shaken out of shares.

ITC has big net margins, in part because of its business structure. The firm charges tariffs to power companies for the privileges of using its network. Any given quarter, barring any big one-time capital expenditures, a big chunk of those tariffs gets passed directly onto ITC's bottom line.

Another result is cash. Last year, the firm generated more than $380 million from its operations, well above the level ITC needs to pay off debt and dividends. Utilities have traditionally been a bastion of safety for income investors, and even though ITC's business is different than a run of the mill regulated utility, its payouts are no different. I'm expecting a dividend hike in the next quarter.

To see these dividend plays in action, check out the Potential Dividend Hikes portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on