BALTIMORE ( Stockpickr) -- If you don't own dividend stocks right now, you're doing something wrong.

Even though most investors have been watching capital gains rack up in the S&P 500 with mouths agape, the fact is that dividend-paying stocks have gone further faster in this quality-driven stock rally. And as another wave of nervousness comes over Wall Street this week, those hefty income checks act as a pretty strong reminder of why dividends matter.

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Yes, despite the "market overvalued" rhetoric that's been floating around for the last three or so years, dividend checks are very strong on a historical basis right now. In fact, the dividend yield of the S&P 500 is higher now than it's been on a sustained basis anytime since 1995.

And adjusting for the near-zero interest rates in the fixed income market, dividend payouts are higher than they've ever been before.

Better still, U.S. corporations are currently sitting on record profitability and cash reserves right now. That means that they've got the wherewithal to keep hiking their payouts into 2013 and beyond. One of the best ways do boost your own returns in 2013 is to step in front of the next round of dividend hikes; to do that, we'll take a look at our "crystal ball."

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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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First up is Caterpillar ( CAT), the largest heavy equipment manufacturer in the world. CAT currently pays out a 52-cent quarterly dividend, a payout that adds up to a 52-cent yield at current price levels. But Caterpillar looks ready to increase that payout in the next quarter. Here's why.

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It's not just size that makes CAT's positioning in the equipment business attractive -- the firm has a reputation for well-built machines that see limited downtime. That gives Caterpillar a leg up in an industry that's seen sales volumes contract from their pre-recession peak. Make no mistake: The $100 billion heavy equipment market is still massive, but it's shy of the high water mark set when firms were buying bulldozers, excavators and mining equipment as fast as Caterpillar could build it.

Caterpillar shored up its operations in the wake of the Great Recession, and the firm managed to dramatically increase its unit sales and net margins even as peers were struggling to recover. With a captive finance arm and low interest rates fuelling sales for customers who want to take advantage of extremely cheap borrowing costs, CAT should have little trouble moving its machines -- especially as green sprouts start popping up in the global construction business.


2013 is panning out to be a strong year for truck manufacturer Paccar ( PCAR). The $19 billion firm has seen its share price rally nearly 20% year-to-date, besting the already-impressive performance in the S&P. Paccar builds trucks under the Peterbilt, Kenworth and DAF brands, with a huge 25% share of the U.S. market and more than a 15% share of the European market for commercial trucks.

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An aging worldwide commercial truck fleet should provide a major tailwind for PCAR. As companies look to replace older fuel-hungry and high-maintenance trucks in their fleets with new models, the firm's offerings are well-positioned to take their place. Like Caterpillar, Paccar's brands have a reputation for quality, so the firm is able to charge premium pricing and earn deeper margins without eating into its sales numbers.

Historically, PCAR has been able to turn just under 10% of sales into cash, an impressive number for a capital-intense business like truck manufacturing. As a result, Paccar boasts an attractive balance sheet with a hefty cash position and a reasonable amount of debt.

Currently, the firm pays out a 20-cent dividend that works out to a 1.5% yield. With PCAR's history of payout hikes, investors look due for a raise in the next quarter.

Seagate Technology

Seagate Technology ( STX) is another name that's had a stellar year in 2013. The hard drive maker has seen its shares rally more than 41% since the calendar flipped over to January, and another breakout this week points to even more upside in shares in the near-term. But it's Seagate's 38-cent dividend payout that looks most attractive right now; despite the huge climb in this stock's share price, it still yields 3.5%.

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Seagate is a major manufacturer of computer hard drives. More specifically, it's the biggest manufacturer of enterprise hard drives, the storage medium that powers the world's servers and IT departments. The firm's growing consumer segment provides an attractive way to harness increasing user demands for storage space, but ultimately the same "cloud storage" model is buoying all ships in this market. Datacenters and computer manufacturers can't increase storage capacities quickly enough.

Hard drives won't be around forever. Newer, faster solid state drives have some big benefits over conventional disk drives, albeit at a much higher cost per GB. Seagate's early investments into solid state technology should pay off even as solid state sales eat into its bread and butter business. It's better STX eat some of its own lunch than a third party SSD manufacturer, after all.

With almost $2 billion in cash on its balance sheet to offset a $2.5 billion debt load, as well as massive cash flow generation from its sales, Seagate has the wherewithal to boost its dividend payout in the near-term.

Republic Services Group

Dividends and garbage go together like peanut butter and jelly. Don't follow?

Waste management companies are like the defensive line of your portfolio: They're recession resistant, they have limited competition, and they throw off tons of cash that gets paid out as dividends. So it should come as little surprise that solid waste management firm Republic Services Group ( RSG) is on our list of potential dividend hikers today. There's no doubt that Republic is a garbage stock -- but in a good way.

The company is the No. 2 trash collection company in the country, with 334 individual subsidiaries, close to 200 active landfills and a trash-to-energy business. While trash collection is recession resistant, it's not completely insulated from the economy's ebb and flow. With rising trash volumes as the economy continues to heat up, Republic's business should looks increasingly attractive in 2013. As one of two national players in the trash business, RSG is also able to capture the biggest country-wide contracts that smaller rivals can't handle.

Republic has historically built its business on acquisitions. And while that's left its balance sheet a little on the leveraged side, its cash generation helps to make up for that in a big way. The firm has paid out its 23.5-cent dividend for the last four straight quarters, and I think we're due for a hike to the firm's 2.7% yield. Keep an eye on second-quarter earnings later this summer.

Best Buy

2013 is looking like a transformative year for Best Buy ( BBY) -- or at least that's the plan. Despite getting shellacked by poor sales and scandals in recent years, the firm is emerging from the shadows with a turnaround plan and the ability to execute on it. As sales and profits continue to improve, so too should Best Buy's dividend payout.

Not long ago, Best Buy was little more than a physical showroom for online retail competitors. While the convenience benefits of its brick-and-mortar locations were hard to beat, its prices weren't -- especially on big-ticket items that historically offered the biggest margins. The "Renew Blue" turnaround plan aims to change that. And so far, it's been a success.

There's no question that the electronics retail business is tough -- there's a reason why BBY is the only pure-play name left in town. But that's a big advantage that the firm can leverage as it trims costs, ups profitability and becomes a destination store once again.

If Best Buy can de-commoditize its sales experience (and provide a benefit over the generalized big box giants that it competes against), it has a fighting chance at achieving meaningful growth. Right now, Best Buy pays out a 17-cent dividend for a 2.5% yield. That's an impressive payout considering that this stock has more than doubled in 2013.

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.

Follow Jonas on Twitter @JonasElmerraji