BALTIMORE (Stockpickr) -- It's official: With Alcoa's (AA third-quarter earnings release on Tuesday, the floodgates of earnings season are officially open.

And for dividend investors, that's a big deal. Typically, dividends and earnings season go hand-in-hand. It makes sense, after all, that firms want to announce their dividend payouts around the same time that they announce the earnings that are going to pay for them. This quarter, earnings could be particularly interesting.

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That's because it's the final earnings season of 2012. Investors are going to be watching stock fundamentals closely to see whether the numbers really justify the record bearish sentiment that's still lingering over Wall Street, or whether the numbers support the rally that's been heating up since June. Not surprisingly, then, earnings season can also have a big impact on stock prices when performance details and dividend payouts become public.

But there's a better way for income investors to build their dividend portfolios than just piling in after a big dividend hike.

That's exactly why we're scouring the stock market for a new group of big-name stocks that look ready to hike their dividend payouts in the coming quarter. In other words, these five firms are getting ready to boost dividends; they just don't know it yet.

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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 this late-2012 rally. The number of dividend hikes we've already been able to predict with this same approach speaks volumes about this approach.

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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2012 has been a great year for AT&T ( T - Get Report). Shares of the $218 billion communications firm have rallied around 25% this year, not a bad showing for a mammoth-sized blue chip.

That upside is actually a bit on the conservative side; it doesn't include AT&T's massive dividend payout, a 44-cent quarterly dividend that's currently a 4.66% yield. Despite the size of this telco's payout, I think that this stock looks well positioned to cut even bigger checks to investors in the next quarter. Here's why.

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AT&T is the biggest mobile phone stock in the U.S. Even though Verizon Wireless boasts millions more customers, Verizon ( VZ only owns 55% of its cellular carrier subsidiary. AT&T, on the other hand, lays claim to all of AT&T Mobility and its 89 million cell phone subscribers. The firm also owns around 40 million landlines and serves millions of TV and internet subscribers.

While most investors rightly focus on AT&T's wireless business, the firm's fixed-line business boasts hefty replacement costs and significant cash generation. The firm has a strong balance sheet with a debt load that's been diminishing to levels not seen at most telecom stocks. That gives AT&T plenty of wherewithal to hike its dividend payout in the next quarter. Investors should watch earnings at the end of October.

I also featured AT&T last month in " 5 Toxic Stocks to Sell Now."

Kinder Morgan

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Kinder Morgan ( KMI - Get Report) is another name that looks primed for a dividend hike right now. The $40 billion gas pipeline partner has a history of meaningful dividend hikes, boosting its payouts every quarter in the past 12 months. That makes a boost to Kinder Morgan's 35-cent payout as close to a sure thing as you get in the investment business.

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Dividend investors love Kinder Morgan. KMI is a holding company that owns the general partner and incentive distribution rights for Kinder Morgan Energy Partners ( KMP, an MLP; in other words, it's an investment vehicle that's designed to maximize distribution income for investors. It earns that dividend cash through its ownership of more than 37,000 miles of pipelines and 180 commodity storage terminals spread across the country. By owning the transportation infrastructure that moves commodities, the firm benefits from increased commodity prices (they make producers work less hard to negotiate deals), but it has less exposure than a pure commodity name.

KMI's claim to fame is that it's a traditional corporation rather than a more exotic MLP. That means that the tax consequences of the firm aren't any different than owning any other stock, making it a popular choice for more investors. The El Paso acquisition this year is one big catalyst that should help KMI pay out bigger dividends in the near-term.

I also featured KMI in a list of Stocsk Hedge Fund Managers Love.

Freeport-McMoRan Copper & Gold

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Another dividend-focused commodity name is Freeport-McMoRan Copper & Gold ( FCX - Get Report). Freeport is one of the biggest copper and molybdenum miners in the world, with mines that span North and South America, Africa, and Asia.

So just how big is FCX? Pretty big: Freeport produces around 12% of the world's copper output, a scale that affords the firm an attractive market position for the metal. Copper prices have done well in the past several years, and so has gold. With QE3 building up speed this month, hard commodities should have plenty of upward mobility in the next few quarters, driving Freeport's double-digit margins even higher than they are now.

Freeport has made some massive financial strides in the past several years, moving from a highly-leveraged balance sheet to one with a net cash position that's more than a billion dollars in the black. That cash gives investors a pretty attractive margin of safety right now, especially with FCX's dividend payout tipping 3.1%. Better, it sets the firm up for a dividend hike in the next quarter.

With third-quarter earnings just on the horizon, it makes sense for income-seekers to keep a close eye on this stock right now.

Campbell Soup

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Soup giant Campbell Soup ( CPB - Get Report) has a brand portfolio that goes far beyond the can that Andy Warhol made iconic, with brands such as Pace, Prego, Swanson and Pepperidge Farm in addition to its namesake label. Campbell has historically had a lot of folks betting against it; its short interest ratio of 6.6 is still on the high side, just not as high as it's been.

But the shorts may have a nasty surprise in the form of a dividend hike. Currently, CPB pays out a 29-cent quarterly dividend. That's a 3.3% yield at current price levels.

To be sure, there are some black clouds in this stock. First, input costs are still growing for food manufacturing firms like Campbell, particularly in agricultural commodities that have rallied hard for months. At the same time, CPB's sales have effectively flat lined over the last couple of years, not necessarily an ominous sign (the firm still moves close to $8 billion worth of food each year), but not a reason to be a buyer. That said, revenues could be turning the corner, especially if international growth helps to offset both headwinds.

The firm still generates plenty of cash on hefty margins to warrant a dividend hike in the next quarter. Earnings for 2013's first fiscal quarter happen on Nov. 20.

Hormel Foods

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Hormel Foods ( HRL - Get Report) is another food stock that looks likely to boost its dividend payout in the next quarter. Right now, Hormel pays a 15-cent per share payout that equates to a 2% dividend yield at current price levels.

Like Campbell Soup, Hormel is a diversified food manufacturer with brands like Jennie-O and Country Crock under its belt. But despite the diversification, at the end of the day, Hormel is a meat company. The firm is a major turkey and hog processor, but they've avoided the lion's share of input costs by embracing vertical integration. Since HRL itself raises the animals that it sells on grocery shelves, it's able to save costs and absorb more inflation in its cost of goods sold without impacting its selling price.

The food processing business is capital intense, but Hormel is in strong shape. The firm has close to a billion dollars in cash and investments, easily offsetting a $250 million debt load. That abundance of balance sheet liquidity helps to ensure that the firm can continue to pass on more cash to its investors in the coming quarters. Like CPB, Hormel announces its numbers on Nov. 20.

To see these dividend plays in action, check out the at Dividend Stocks for the Week portfolio on Stockpickr.

And if you haven't already done so, join Stockpickr today to create your own dividend portfolio.

-- 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