BALTIMORE (Stockpickr) -- After the roughly 30% rally the S&P 500 Index pushed out in 2013, you'd be forgiven for ignoring dividend stocks. Capital gains, not dividend payouts, ruled the roost last year. And they gave investors the biggest single-year gains since 1997.
But as 2014 enters its second trading session, I've got an important warning for investors: Eschew dividends at your own peril.
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. The numbers are even more compelling when looking at companies that consistently increase their payouts.
With a record $1.25 trillion in cash held by the companies that make up the S&P 500 right now, there's a lot of dry powder sitting on the sidelines ready to get shelled out. And with limited options to deploy those mammoth cash reserves right now, dividends continue to be an obvious choice.
To take advantage of that trend today, we're focusing on dividend stocks that look ready to hike their payouts. So instead of chasing yield, we'll try to step in front of the next round of stock payout hikes.
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.
Without further ado, here's a look at five stocks that could be about to increase their dividend payments in the next quarter.