Stock Quotes in this Article: AXP, GD, SPLS, TWC, WM

BALTIMORE (Stockpickr) -- Are you ready to pay bigger taxes on your dividend income in 2013? That's the question that Congress is still mulling over on Capitol Hill right now as the Fiscal Cliff debates rage on.

>>5 Stocks Insiders are Stashing

The automatic tax hikes on dividend income would increase the rates Americans pay on dividend income by around a third, effectively erasing the 35% increase in dividend payouts that investors in the S&P 500 have enjoyed since the market started its rebound in 2009. Around half of that dividend performance has come in the last year alone -- S&P 500 components currently pay 17.85% more in cash per share than they did a year ago. Right now, Mr. Market is pricing in a resolution for most income investors' tax situation in the year ahead.

Those are impressive growth rates for dividend payouts, but with corporate cash at record highs and interest rates being held near the ground, it's likely we'll continue to see firms opt to return cash to owners. Make no mistake -- that's a very good thing. Historically, bigger dividends correlate with bigger total returns for investors.

We're trying to step in front of the next set of dividend hikes this week.

In other words, these five firms are getting ready to boost dividends; they just don't know it yet.

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 this late-2012 correction.

>>5 “Magic Formula” Stocks for 2013

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

American Express

First up is financial firm American Express (AXP). With a dividend yield of 1.43% right now, AmEx is by no means a core income holding -- but that modest dividend payout can still have a material impact on shareholders' returns in this market. After all, it's worth noting that investors who bought shares back in the slump year of 2009 are sitting on a 4.7% cost yield right now. It looks like that yield could be headed higher in the next quarter.

American Express owns one of the premier payment card networks in the world. While it trails behind rivals like Visa (V) and MasterCard (MA) in terms of the number of cards issued, AXP beats its peers in terms of dollar volume. Because American Express' high-end brand enables the firm to charge deeper fees than other card issuers, the firm's profitability is enviable. On the flip side, AmEx is the sole big-three card network that's also an issuer, a status that throws extra risk on the firm's balance sheet. The firm's more recent embrace of third party issuing banks should help the firm grow its fee revenue without expanding its exposure to credit risk, a good tradeoff in my view.

Like other lenders, AmEx opted to become a bank holding company in the wake of the recession. While the move gives AmEx access to cheap capital, it's also imposed bigger restrictions on the risks that the firm can take with its own cash -- and with investors' cash. That said, the more affluent demographics attracted to American Express' flagship charge cards should continue to fuel impressive dollar volume through the firm's network as the economy heats back up, and that should help shovel cash into the firm's coffers. With AXP's 20-cent quarterly dividend sitting stagnant for four quarters now, a hike looks likely in the near-term.

Time Warner Cable

It's hard to be a cable company. Just ask Time Warner Cable (TWC) -- the $28 billion spin off has the capital needs of a typical utility firm without the whole government-sponsored monopoly deal that most utilities get. Instead, competition continues to intensify for communications providers. But that hasn't stopped TWC from generating some impressive numbers since splitting off from its parent company in 2009.

Time Warner Cable owns a network that spans more than 29 million U.S. homes, providing TV, internet, and phone service to customers concentrated on the East Coast and more recently in the Midwest. Among the various kinds of communications firms vying for consumers' TV, phone, and internet dollars, cable companies are probably the best positioned if only for the fact that their networks can handle higher bandwidth. Just look at Verizon (VE), whose FiOS service is great, but costs an estimated $4,000 to run to a new residential customer; it's hard to be profitable when your breakeven targets are so far away. TWC has been paying down the cost of its network for years now, keeping costs well below the cash it generates.

That cash generation ability means that TWC has the wherewithal to hike its dividend payout in the near-term. Right now, TWC pays a 56-cent quarterly dividend payout for a 2.37% yield.

General Dynamics

Defense contractor General Dynamics (GD) earns the lion's share of its revenues building ships, defense systems, and armored vehicles for the Department of Defense -- and it owns a lucrative smaller gig building Gulfstream business jets. While the flashy jets may get a lot of attention, it's the contracting business for the DoD that pays more than 70% of the bills.

While defense spending cuts continue to be a big black cloud for contractors right now (especially with the Fiscal Cliff resolution unclear), GD's mission-critical equipment helps give the firm a big advantage in keeping contracts alive. Vehicles like the Abrams tank have huge installed bases here at home and with our allies -- that gives GD a lucrative service business for a combat vehicle that's expected to remain in service for the next forty years. And with Congress eager to appease the defense lobby if defense spending gets slashed, international sales are likely to continue to get greenlit by Capitol Hill.

The convalescing economy also holds hope for the bizjet market. Gulfstream has been shipping more planes every year since the Great Recession, a strong sign for General Dynamics' non-defense business. As the business cycle heats up, so should the business case for buying a big-dollar corporate airplane. GD's current dividend payout sits at 51 cents per share, a 3.06% yield at current price levels. With ample margins and strong cash generation, this stock looks primed for a dividend increase.

Waste Management

For income investors, Waste Management (WM) has been turning garbage into gold for years. The $16 billion firm is the largest waste services firm in the country, with more than 270 landfills and a massive fleet of vehicles that spans the U.S. Trash collection is typically a recession-resistant business, with revenues more or less constant in good times and bad. That, and a huge dividend yield at 4.22% make this a solid name for investors who want to play defense.

It's not all about garbage for Waste Management. Recycling has become a cash cow for the firm -- if still a small part of the firm's total operations. WM's portfolio includes 22 waste-to-energy plants that are designed to turn the waste that WM literally gets paid to collect into renewable energy that the firm gets paid for again.

Waste Management has been consistently generating cash throughout the recession, even if its share price was punished more than most other defensive stocks have. But with top and bottom line numbers just a hair's breadth away from eclipsing pre-2008 profits, WM is able to push a bigger yield to investors right now than it could before. That makes a dividend hike look likely right now, as this firm's share price plays catch up.

Staples

Staples (SPLS) may be best known for its retail stores, but selling office supplies directly to businesses is the Massachusetts-based firm's bread and butter. Staples boasts more than 2,000 stores in 25 countries, as well as an absolutely massive online presence, weighing in as the second-largest online retailer in the world by sales. Retail is hugely competitive, with everyone from Wal-Mart (WMT) to Best Buy (BBY) trying to take share from the aptly-named office supply company -- that's what makes B2B sales so attractive.

Staples has a delivery infrastructure that conventional retailers can't match. For that reason, the firm is able to hold onto the bulk office supply market better than anyone else. Because office supplies typically make up a tiny share of companies' costs, the convenience of both next-day local delivery and brick-and-mortar locations makes SPLS a no-brainer for most delivery accounts. The firm has been a big proponent of boosting the number of private label SKUs in its inventory, a move that's helped to hike margins and give SPLS better costs than competitors without the wherewithal or the desire to delve into producing their own notebooks, pens, and reams of paper.

Staples tacked on some debt to acquire Corporate Express in 2008, but the exposure to the corporate delivery market was worth the leverage, and management has been aggressive about paying down outstanding borrowings. Today, with more than a billion dollars in cash and $1.6 billion in debt, SPLS is in strong financial health. The firm's 11-cent quarterly dividend comes out to a hefty 3.84% yield right now, but four straight quarters at that payout make a modest hike look probable for the next quarter.

To see these dividend plays in action, check out the at 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. 



RELATED LINKS:

>>5 Dividend Stocks to Fight Off the Fiscal Cliff

>>5 Stocks Warren Buffett Loves

>>5 Toxic Stocks to Dump Before 2013

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.