Stock Quotes in this Article: HON, JCI, MCD, TXN, YUM

 BALTIMORE (Stockpickr) -- To be a good income investor, you’ve got to have a crystal ball.

In other words, you’ve got to find a way to step in front of dividend hikes before they happen, not after they’ve been priced into shares. That’s usually easier said than done. But it’s not impossible.

In fact, 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. This week, we’ll do it again.

It’s open season for dividend stocks right now. Fed Chairman Ben Bernanke has already said that interest rates are going to be nailed down near zero for the foreseeable future, and meanwhile, corporations are sitting on record profits and record cash holdings. That means that dividend stocks are income-seekers’ only hope of generating decent yields right now -- and it means that U.S. companies have plenty of dry powder to fuel dividend hikes in 2012.

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And by picking out firms likely to see a dividend boost in the future, we can earn a bigger cost yield than the folks trying to chase yields right now. So, how do we spot potential increasers?

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 two, they do dramatically increase the odds that management will hike their cash payouts, especially as investors start to get antsy about this mid-2012 rally.

Without further ado, here’s a look at five stocks that could be about to increase their dividend payments in the next quarter.

McDonald’s

Topping off our list is fast-food giant McDonald’s (MCD). With more than 33,500 locations in 119 countries, McDonald’s is clearly the standard bearer in the quick service restaurant business. A few years ago, the McDonald’s brand was tired. Challenged by an unhealthy image as the lowest rung on the restaurant ladder, McDonald’s poured cash and effort into revamping its stores, adding healthier options, and upping its premium food offerings.

While the Big Mac is still big business for McDonald’s, it’s now flanked by Angus burgers and McCafe drinks that can compete with anything a Starbucks (SBUX) barista can dish out. That new positioning proved prescient for MCD because it shored up the brand at the exact same time that swarms of consumers were trading down in their eating out. As a result, McDonald’s was one of the few names that actually thrived during the recession.

Financially, the firm is in stellar shape, bolstered by a business model unique among restaurant chains that has the MCD owning most of the land that franchised stores are built on. One result is that McDonald’s generates plenty of cash -- enough to support a bigger dividend than the 70 cents Mickey D’s currently pays.

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Investors looking for a defensive core income holding can look no further than McDonald’s. The timing is good too -- McDonald’s is one of five Rocket Stocks that I talked about on July 23.

McDonald's also shows up on a recent list of 5 Volatile Stocks to Buy More Of.

Yum! Brands

But McDonald’s isn’t the only fast food name on our list of potential dividend hikers. The other is Yum! Brands (YUM). Yum! owns an array of popular quick service restaurant concepts, including KFC, Taco Bell and Pizza Hut. Scale is massive for Yum! -- the firm has more than 37,000 stores in 120 countries, making it the largest restaurant network in the world.

While Yum!’s store performance can’t compete with McDonald’s (MCD earns more than twice as much per unit), it is besting the Golden Arches in one key market: China.

Yum! was first to the draw in China, bringing its popular American brands over to the People’s Republic. Since then, it’s also added local concepts like East Dawning and Little Sheep Hot Pot to its brand portfolio -- the latter has even spread its wings across the pond with a handful of locations spreading in the U.S. and Canada. China is a big market that holds the keys to serious growth for Yum!, and it’s acting as a springboard to other emerging Asian markets like Vietnam and Malasia, where Yum should be able to get its store count even bigger than it is now.

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Like McDonald’s Yum! is in solid financial shape with cash generation capabilities that easily cover the firm’s debt payments with room for a bigger dividend. Even though Yum doesn’t have a payout nearly as high as McDonald’s, investors looking to capture growth in China could do worse than this $30 billion chain.

As of the most recently reported period, Yum! was one of the top holdings at Steven Cohen's SAC Capital.

Honeywell

Diversified manufacturer Honeywell (HON) is another name that looks primed to increase its payout in the next quarter. The firm currently pays out a 37.25-cent quarterly dividend, a 2.58% yield at current price levels. But Honeywell has been slowly building up the cash in its coffers over the past few years. If it wants to earn a meaningful return on that cash in this market, it’s going to be best serves sharing some more with its owners.

Honeywell builds everything from aircraft parts to factory control systems to household thermostats, manufacturing exposure that’s necessarily cyclical. For that reason (and particularly because of hefty transportation sector exposure), the firm got hit hard during 2008. Like many industrial manufacturers, Honeywell took the recession as an opportunity to shore up its business and improve the drags on its earnings. That puts the firm in good shape to take on any economic headwinds that pick up in 2012.

In the meantime, hefty exposure to the aviation business is finally getting rewarded by increased aircraft orders. Because HON has parts in so many commercial and general aviation planes, it should benefit materially from that increased order volume.

Texas Instruments

No shock, shareholders of Texas Instruments (TXN) are having a rough year, dragged down by a slowdown in the semiconductor industry as a whole. As I write, shares of the $31 billion firm have slid more than 7% since the first trading day of January. But TXN owners could get some reprieve from a boosted dividend -- and investors looking for a lower cost yield have one.

TXN may be best known for its ubiquitous calculators, but the firm’s biggest business comes from its position as the world’s largest analog chipmaker. Analog chips are used to process analog signals (voices, for instance) and turn them digital. As a result, TXN has a big role supplying components to the fast-paced mobile phone market. The firm has been entrenching itself in the chip business, spending money on next generation manufacturing equipment and acquiring National Semiconductor last year in a deal that dramatically boosted TXN’s positioning in the analog chip market.

While that acquisition added some debt to Texas Instruments’ formerly debt-free balance sheet, it’s a modest obligation compared to the amount of cash that the firm is able to generate. I’d anticipate a hike to TXN’s 17-cent dividend later on in 2012.

Johnson Controls

Johnson Controls (JCI) is the last stock we’ll take a look at today. A diversified manufacturer, the firm operates in three businesses: HVAC systems, automotive interiors, and car batteries. While that positioning has historically left Johnson Controls beholden to the automotive sector, that’s actually been a good thing for the firm more recently. After all, car sales have been on fire as near-zero interest rates and a historically old national car fleet sent buyers looking for new rides.

But while things look good here at home in the world’s biggest car market, they’re looking less good in Europe, where economic headwinds are plaguing any U.S. company that earns in euros and then converts them to dollars for reporting purposes. Growth in the HVAC business has helped to offset that, as growth in Asia and more efficient upgrades stateside drive revenues for HVAC services and equipment.

With cash and investments of over $1.6 billion right now, and ample credit available (including euro denominated accounts), Johnson Controls looks capable of hiking its dividend payout above 18 cents in 2012. A 3% dividend yield makes it a solid core holding for income investors in search of manufacturing exposure.

To see these dividend plays in action, check out the 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, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.