If the S&P 500's sideways grind has taught investors any lessons in 2015, it's the fact that dividends matter. After all, as of this writing, dividend payouts make the difference between being in the black this year and being down year-to-date.
While the S&P is down 37 basis points since the start of January, its total returns are just shy of 1.5% right now. If that difference seems small, the impact of dividend payouts get a whole lot more significant over time. According to research from Morgan Stanley, dividends have contributed more than 41% of the stock market's total returns over the last eight decades.
And with price performance hard to come by this year, owning smart dividend payers makes a lot of sense.
To find the biggest benefit from dividends, though, it's not enough to simply buy names with big payouts today. You've got to think about which names are going to be paying more 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. And they've helped us grab onto dividend hikes with a high success rate in the past.
Without further ado, here's a look at five big stocks that could be about to increase their dividend payments in the next quarter. Think of it as your dividend preview.
2015 has been a strong year for shareholders in industrial conglomerate General Electric (GE - Get Report) . Since January, GE has managed to rally more than 18%, bringing its total returns to 22.4% once dividends are factored in. At present, GE pays a 23-cent quarterly dividend check, but that payout looks likely to see a boost before the calendar flips to 2016.
General Electric has been a company in transition in recent years. The firm has been shedding exposure to financial services, a segment of its business that dominated GE's income statement pre-2008. This week's completion of the Synchrony Financial (SYF - Get Report) spinoff should go a long way in repositioning GE as an industrial manufacturer again. Now GE's biggest focuses include everything from jet engines to medical devices -- and everything in between.
GE's broad reach benefits from deep pockets. With more than $136 billion in cash and investments on its balance sheet, GE has plenty of dry powder to put to work investing in R&D. Likewise, that cash balance pays for approximately half of the firm's long-term debt load, significantly reducing leverage on its balance sheet.
It also leaves plenty of room for bigger dividends in 2016. Currently, GE's dividend payouts add up to a 3% yield, but if history is any indication, investors will see a raise in December.
For a technical take on GE, check out "General Electric Is Exhausted and Needs a Rest."
The pressure has been on at Intel (INTC - Get Report) . With PC growth slowing worse than originally expected, Intel has had to turn its focus onto other, more competitive markets to find growth opportunities. And while that's harangued shares to some extent in 2015, this stock has actually been returning to positive relative strength since August. Couple that with a potential dividend hike in the coming quarter, and Intel could be setting the stage for a strong start to 2016.
Intel is the dominant name in the semiconductor business, owning approximately 80% of the world's microprocessor market. While PC shipments look sluggish, the firm has been doubling down on its more niche businesses, providing high-octane chips for servers and processors and other components for mobile devices. The popularity of mobile devices, particularly on the consumer side of the market, is a trend that's unlikely to get shifted any time soon, but the short replacement cycles of mobile devices help to offset Intel's comparatively smaller share of the market.
From a financial standpoint, Intel is in stellar shape, with $12.7 billion in net cash and investments. At current price levels, that's enough to pay for approximately 8% of Intel's market capitalization today, giving this chip giant an ex-cash price to earnings ratio of just 12.8.
Look for management to boost investor returns with a dividend hike this quarter. In the meantime, shares currently pay a 24-cent dividend that adds up to a 2.9% yield today.
United Parcel Service
Package delivery giant United Parcel Service (UPS - Get Report) is another blue-chip stock that looks primed to announce a dividend hike in the quarter ahead. UPS is the world's largest package delivery company, with a fleet of more than 100,000 vehicles delivering more than 18 million items each day. And after guiding lower earlier this year, UPS looks well-positioned to start exceeding investors' expectations once more.
UPS benefits from some major trends as we head into 2016. First, a shift toward more online shopping bodes well for delivery firms such as UPS. Internet retail sales have more than quadrupled since 2005, and while margins are much thinner on consumer shipments, the volumes are immense. Likewise, with more than 500 planes, UPS owns one of the biggest airline fleets in the world. But it's also been one of the few publicly traded Part 121 air carriers whose stock hasn't benefited from the free fall in jet fuel prices and hugely upgraded aircraft efficiency in recent years.
UPS also owns a hard-to-replicate network. Only peer FedEx (FDX - Get Report) , whose business is more concentrated in the lower-margin express shipping segment, owns similar capabilities. That big moat should keep the competition at bay, as retailers -- including UPS' biggest customer and theoretical competitor, Amazon.com (AMZN - Get Report) -- are well aware of the huge cost and operational risks of trying to replicate a shipping network of that scale.
For now, UPS pays a 73-cent quarterly dividend, but after four straight quarters holding flat, the firm looks likely to give investors a raise in the next couple of months.
T. Rowe Price Group
As U.S. equity markets look ready to end their eighth straight year without a meaningful drop in stock prices, asset managers such as T. Rowe Price (TROW - Get Report) have been enjoying strong revenue and profit growth. And for its part, T. Rowe has been sharing those profits with investors. In the last five years, this Baltimore-based financial stock has grown its dividend by nearly 10%. Now investors look likely to see a raise in early 2016.
T. Rowe Price is one of the biggest asset management firms in the country, with approximately $730 billion in assets under management. The firm's primary focus is retirement accounts, which comprise more than half of its asset base. T. Rowe's funds have historically been strong performers, with nearly 90% of funds beating their 10-year peer averages. At the same time, conservative management kept investor losses smaller than average during the financial crisis of 2008, a fact that keeps assets sticky from long-term investors in T. Rowe's retirement accounts.
Historically, T. Rowe Price has been an equity shop, and while rising interest rates and aging demographics could lure some capital away from stocks and into fixed-income in the coming years, the firm's target-date retirement portfolios make it easier for investors to just keep their assets with T. Rowe when they make that move.
T. Rowe Price's 73-cent dividend payout currently adds up to a 2.8% yield. A February dividend boost looks likely.
Molson Coors Brewing
Last up on our list of potential dividend hikers is Molson Coors Brewing (TAP - Get Report) . Molson Coors is one of the largest beer companies in the world, with a collection of brands that includes Coors Light, Molson Canadian, Miller Lite and Blue Moon -- among many, many others. The alcoholic beverage industry has been undergoing some major consolidations lately, including the acquisition of SABMiller, Molson Coors' partner in the MillerCoors joint venture. SABMiller's plan to sell the rest of MillerCoors to Molson winds up being a big unintended win for this beverage stock.
Another big beer development from this week is the acquisition of Ballast Point Brewing & Spirits by Constellation Brands (STZ - Get Report) in a $1 billion deal. That hefty price adds value to Molson Coors' portfolio, w hich includes craft brands such as Blue Moon and Leinenkugel, two of the biggest craft labels (or "craft lite" labels, more accurately) in the country.
The strength of the dollar has been a persistent challenge for Molson Coors, particularly given its extensive exposure to the Canadian beer market, where it commands 37% of beer sales. The firm also owns about 20% of Europe's beer market, another drag on performance reported in dollars. The full acquisition of MillerCoors by Molson in 2016 should bump up its exposure to the U.S., reversing that trend somewhat.
Currently, Molson Coors pays a 41-cent dividend that works out to a 1.72% yield. That payout is likely to see a hike in early 2016.