5 Dividends That Are About to Get Bigger
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.
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.
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.
IT behemoth IBM (IBM) 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.