U.S. Markets closed

Short Sellers Make Big Changes in High-Yield Dividend Stocks

Jon C. Ogg

Short sellers are continuing to keep their bets against many of the top defensive high-yield dividend stocks. Increased volatility in June and rising interest rates are obviously making short sellers get aggressive in some cases and lower their bets in other cases. The latest short interest covers the July 15 settlement date, versus June 28 settlement date. We have also added color if appropriate.

The top dividend stocks we track in the short interest are as follows: Altria Group Inc. (MO), American Electric Power Co. Inc. (AEP), Annaly Capital Management Inc. (NLY), AT&T Inc. (NYSE: T), Duke Energy Corp. (DUK), General Electric Co. (GE), Kimberly-Clark Corp. (KMB), Kinder Morgan Energy Partners L.P. (KMP), Merck & Co. Inc. (MRK), Procter & Gamble Co. (PG), Reynolds American Inc. (RAI) and Verizon Communications Inc. (VZ).

Ten Brands That Will Disappear in 2014

As we have said before, it takes much more conviction to short sell a stock that has a very high dividend. On top of having to pay a broker loan-call rate to borrow the stock, the dividend payouts have to be paid and the ex-dividend dates play into the equation as well.

Altria Group Inc. (MO) had been declining in the shares short, but a small uptick was seen here going to 17.769 million shares from 17.512 million shares. Altria yields only about 4.8% as of now, because shares are up around $37 again.

American Electric Power Co. Inc. (AEP) had previously jumped more than 30% in its short interest, and this short interest report was up another 8% to 4,628,422 shares. AEP yields about 4.2%.

Annaly Capital Management Inc. (NLY) is suffering with the rest of mortgage REITs, but its short interest fell more than 11% to 33,189,560 shares from 37,388,702 shares. Annaly is down sharply from its highs, but still has a double-digit dividend yield.

AT&T Inc. (NYSE: T) saw a larger gain in the short interest this time than two weeks ago, as its short interest rose by 10% to 84.7 million shares. AT&T's dividend is 5.0% and is the highest yield of all 30 DJIA stocks.

Duke Energy Corp. (DUK) saw its short interest rise again, but this was a gain of nearly 16% to 8.195 million shares as of July 15. Duke has a dividend yield of about 4.4%, and it just raised its dividend.

Ten Cities Where the Poor Can't Get Rich

General Electric Co. (GE) is the highest yielding conglomerate, but short sellers decided to call it a day here. The short interest as of July 15 fell by a sharp 12.4% to 74,164,427 shares. GE shares come with a dividend yield of 3.2%.

Kimberly-Clark Corp. (KMB) added again in the short interest, but this gain was only 2.1% to 8.508 million shares as of July 15. The consumer products giant's dividend yield is about 3.3%.

Kinder Morgan Energy Partners L.P. (KMP) has seen a steady rise in the short interest, but this gain was sharp at 21.6% to 3.668 million units. Its dividend is actually a distribution and now is back down to the equivalent of about 6.1%.

Big Pharma short changes: Merck & Co. Inc. (MRK) saw a gain of almost 3% to 76,200,607 shares in its July 15 short interest, versus 74,077,186 shares at the end of June. Pfizer Inc. (PFE) saw a massive drop of literally almost 50% as the short sellers have gotten out of the way of its restructuring and spin-off. Its short interest was down 49% to 169.3 million shares. Merck has a yield of 3.6%, versus Pfizer's yield of 3.4%.

Procter & Gamble Co. (PG) saw only a drop of 1.5% in its July 15 short interest to 21,997,523 shares. P&G’s dividend is down to 3% now that shares have recovered to above $80.

Reynolds American Inc. (RAI) saw a drop of only 1% in the short interest down to 9,712,608 shares as of July 15. Reynolds has a yield of about 4.8% now that shares hit a new 52-week high.

Verizon Communications Inc. (VZ) saw its short interest drop again, this time with a 3.3% drop to 46.86 million shares. Verizon's dividend yield is currently much lower than AT&T at 4.1%.

Related Articles