BALTIMORE (Stockpickr) -- Don't get fooled by the flash of new all-time highs in the big stock indices; if you're not buying dividend names, you're missing out on a big chunk of total returns in 2014. The Dow Jones Industrial Average is a perfect example right now: Factoring in dividends means 44% higher total returns year-to-date than capital gains alone.
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That's right -- dividends have added nearly half again to Wall Street's biggest stock returns this year. And a funny thing has been happening in the last few sessions too. New highs have been propelled by high-yielding blue chips, not momentum stocks.
Turn your focus long-term, and the importance of owning dividend stocks becomes even more jarring. According to research from Wharton Professor Jeremy Siegel, reinvested dividends account for as much as 97% of total long-term market performance. Better yet, dividends even impact how big your capital gains are. Data from Ned Davis Research reveals that, over the last 36 years, 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.
But to find the biggest gains, it's not enough to simply buy names with big payouts today -- you've got to think about what they'll be paying tomorrow too. 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, 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 to shareholders.
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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