BALTIMORE ( Stockpickr) -- Capital gains are great, but don't discount the dividends.

Sure, it's easy to forget about stolid dividend payers when stocks are in rally mode, but if you don't pick up on the dividend payouts in this market, you're doing your portfolio a big disservice. Research shows that dividends can account for around 50% of returns on any given year -- and compounded over the long term, dividends' contributions to your gains are even bigger. According to research from Wharton Professor Jeremy Siegel, reinvested dividends account for as much as 97% of total market performance.

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As far as returns are concerned, the only thing better than grabbing hold of a big dividend payer is buying up shares of a stock that's about to become a bigger dividend payer. While that's easier said than done, it's far from impossible to step in front of big dividend payouts.

In the past few months we've had some stellar success in finding future dividend hikes just by zeroing in on a few key factors. Now we'll look at our crystal ball and try to do it again.

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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 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.

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IT behemoth IBM ( IBM - Get Report) is enjoying a good January. Shares of the $229 billion company gapped up hard after management posted strong earnings guidance last week. That puts IBM's performance so far in 2013 to 6%, a full point ahead of the S&P 500's impressive 5% run this month. A hike to the firm's 85-cent quarterly dividend could add some serious icing onto the cake. At the moment, IBM yields 1.67%.

IBM builds mainframes, designs software and provides IT services to corporate clients across the world. The "International" in the firm's name is more than just good marketing; the firm earns around 66 cents of every sales dollar overseas. That positioning is especially impressive given the tailwinds in international enterprise IT markets. As customers abroad look to upgrade their computer infrastructure, IBM offers the most storied name in the business.

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The firm has historically been good at identifying trends from afar. The firm unloaded its consumer PC unit to Lenovo in 2005, well before other computer companies figured out that their biggest business had become commoditized and margins were getting squeezed to zero. IBM's dug-in positioning in high barrier markets like mainframes gives it one of the few defensible moats in the IT business...

A dividend hike for IBM isn't without serious precedent. Last year, IBM returned $16.07 billion to investors in the form of dividends and buybacks, forking over more than 7.2% of the firm's current market capitalization. With a rally underway in stocks, dividend payouts are going to start looking like a more attractive way to return value to owners in 2013.

Williams Companies

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Gas pipeline operator Williams Companies ( WMB - Get Report) is another company that's having a good year; shares of the $22 billion firm have climbed almost 23% in the last 12 months, offering up stellar performance compared to the rest of a sideways-trawling oil and gas industry. Williams is one of the biggest names in the business, with more than 15,000 miles of gas pipe and 1,000 miles of natural gas liquids pipelines under its belt. All in, the firm moves more than 10% of the entire country's natural gas capacity.

Williams made some big changes in 2012, opting to unload much of its exposure to commodity prices by unloading upstream assets and swapping them for more midstream assets. While investors could argue against Williams' unloading of its exploration and production unit with natgas skimming historic price lows, the fact that it was a spin-off gives investors exposure to upside in gas without dragging WMB's performance along with it.

One result of that change is a heftier dividend payout. Williams currently pays a 3.87% yield, currently made up of a quarterly 33.78-cent dividend. I'll admit that calling for a dividend hike in WMB is kind of a "gimme." The firm has been consistent about small increases to its payout for over a year now. But that's all the more reason to take a closer look at WMB if you're on the hunt for high-yielders that look likely to boost their payouts further.


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Big-box department store chain Kohl's ( KSS - Get Report) operates more than 1,127 locations spread across the country. The firm's focus is value, offering middle-income consumers well-known brand names at moderate prices. It should be no surprise, then, that Kohl's has enjoy some serious success in the last few years as cost-conscious shoppers rewarded value retailers with meaningful growth. Investors have gotten growth too, in the form of dividends: Kohl's initiated a dividend at the start of 2011, hiking it to 32 cents four quarters ago.

Now, though, this stock's 2.77% yield looks ready for a boost.

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Kohl's isn't your typical department store. Unlike most of its peers, Kohl's doesn't typically anchor mall locations, cutting its overhead and helping the firm follow through on its cost focus. Another secret to the firm's success is product exclusivity. Around half of KSS' sales come from private labels or sub-brands that are exclusive to Kohl's. That, in turn, gives the firm bigger margins and more defensible profitability.

Financially, Kohl's is in very good shape, with a manageable debt load and more than $1 billion in cash sitting on its balance sheet. That wherewithal should give management confidence in hiking the firm's payout this quarter. Keep an eye on earnings at the end of the month for the possible announcement.


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Cintas ( CTAS - Get Report) is celebrating today's jobs numbers release.

The uniform rental firm generally ebbs and flows with the health of the jobs market -- and for that reason, revenue has been doing a lot more ebbing than flowing in the past few years. But with unemployment in a clear downtrend, revenue has spent the last several years in a similarly steep uptrend.

Cintas leads the market for rental uniforms, 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 staff's uniform costs, and Cintas has the opportunity to up sell lucrative add-on services.

The firm's debt load is easily tenable, and almost $340 million in cash helps to even out any unexpected speedbumps in the firm's business strategy. Right now, the firm pays a 64-cent annual dividend for a 1.51% yield. We've had success calling for a dividend hike in this stock in the past, and now the factors we watch are lining up again. While the announcement may be a couple of quarters away, it's not a bad idea to get in early when stocks are in an uptrend.

Wyndham Worldwide

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The timeshare market is heating back up right now. Just ask Wyndham Worldwide ( WYN), the world's largest timeshare and hotel operator. Shares of the $8 billion stock have rallied more than 39% in the last 12 months, easily overshadowing the firm's modest 1.65% dividend yield. But that dividend shouldn't be ignored long-term. For investors who bought back when WYN was at its worst in 2009, the stock's cost yield works out to around 25% annually.

Selling timeshares is lucrative when times are good. Customers buy into properties, paying out substantial purchase costs as well as annual maintenance fees. Because of the huge sunk cost involved, Wyndham's revenue is stickier than anything a traditional hotel could expect to earn -- and it comes with deeper margins too. The downside to that business is that it completely dries up when times turn less good. WYN's ability to weather the last financial storm is a good indicator that management can cope with serious economic headwinds, even in this hugely capital-intense business.

Wyndham has been pretty consistent about boosting its dividend payouts, so with four quarters of its 23-cent dividend now behind it, a boost looks likely for 2013. Keep an eye on the firm's earnings call next week.

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, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to
TheStreet . Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily , and on Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.