Short sellers are trying to decide what to do when it comes to how evaluate the high-yield dividend and defensive stocks. The latest short interest changes as of July 31 are compared to July 15 and prior dates, and it is obvious that short sellers are fearful in some cases and getting bolder in others. There seems to be somewhat of a randomness to the short interest and performance, to the point that short sellers look a bit schizophrenic in the group of high-yield dividends and defensive stocks.
The top dividend stocks we are tracking the short interest in 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).
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. We compared the short interest settlement dates of July 31 versus July 15 and gave added color compared to the recent past on each.
Altria Group Inc. (MO) resumed its decline in the short interest, dropping to 16.971 million shares short as of July 31, versus 17.769 million shares short on July 15. Altria's yield is back up to about 5% now that shares have pulled back to almost $35 again.
American Electric Power Co. Inc. (AEP) gave back all of its prior gains and then some, as far as the short interest is concerned. The July 31 short interest was 4.005 million shares, versus 4,628,422 shares short in mid-July. AEP yields about 4.4% now that shares are back under $45 again.
Annaly Capital Management Inc. (NLY) was suffering with the rest of mortgage REITs, but its short interest fell yet again. The July 31 short interest was 31.356 million shares, versus 33,189,560 shares in mid-July, and this is now a low back to April's short interest. Annaly still screens as a 13% yield, but its $12 share price compares to a 52-week range of $11.19 to $17.75.
AT&T Inc. (NYSE:T) saw another gain, up to 86.645 million shares in the July 31 short interest, versus 84.78 million shares in mid-July. AT&T's dividend is 5.2% now that its stock is back under $35, but we would note that this is the highest yield of all 30 DJIA stocks.
Duke Energy Corp. (DUK) saw its short interest fall almost 10%, down to 7.489 million shares as of July 31, versus 8.195 million shares as of July 15. Duke has a dividend yield of about 4.4%, and it recently raised its dividend.
General Electric Co. (GE) is the highest yielding conglomerate and we just saw another large drop in the short interest: 69.283 million shares short as of July 31 versus 74.164 million shares short in mid-July and versus 84.66 million shares short at the end of June. This was the second smallest short interest for GE in 2013. GE shares come with a dividend yield of 3.1% as its stock is within about 3% of a multiyear high.
Kimberly-Clark Corp. (KMB) was basically unchanged in the short interest: 8,500,114 shares short at July 31 versus 8,508,134 as of July 15. The consumer products giant's dividend yield is about 3.3%, but shares are back under $98, versus a 52-week range of $81.89 to $106.54.
Kinder Morgan Energy Partners L.P. (KMP) had seen a steady rise in its short interest, but now there was a large drop. Its short interest was 2.836 million units at the end of July, versus 3.668 million units in mid-July. Its dividend is actually a distribution and now is back down to the equivalent of about 6.4%.
Big Pharma short changes: Merck & Co. Inc. (MRK) saw its short interest dive to 59.59 million shares at the end of July, versus 76.2 million shares short in mid-July. Pfizer Inc. (PFE) saw another massive drop as the short sellers have gotten out of the way of its restructuring and spin-off: down to 74.957 million shares versus 169.34 million before and down from a peak of 335 million share short this summer. Merck has a yield of almost 3.6%, versus Pfizer's yield of 3.3%.
Procter & Gamble Co. (PG) saw a drop of about 10% in its short interest to 19.465 million shares as of July 31 versus a July 15 short interest of 21,997,523 shares. P&G’s dividend is down to 2.9% now that shares are back above $81 again.
Reynolds American Inc. (RAI) saw a its short interest decline to 9.303 million shares short as of July 31, versus 9.712 million shares short as of July 15. This was the fourth straight drop in the short interest, and it is the lowest short interest since last October. Reynolds has a yield of almost 5.0%.
Verizon Communications Inc. (VZ) was basically flat in the short interest: 46.897 million shares short as of July 31 versus 46.860 million shares short on July 15. Verizon's dividend yield is currently much lower than AT&T at 4.2%.