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We like high dividend stocks and consider them as alternatives to 10-year Treasury bonds. Like Jim Rogers and Ray Dalio, we are concerned about the Fed’s inflationary monetary policy and want to protect ourselves against inflation. One of the ways of doing this without assuming significant risks is investing in high dividend stocks.

High dividend stocks are usually safer but under some circumstances they might be extremely dangerous. The vulnerable high dividend yielding companies may be targeted by short sellers. So, high short interest in high dividend stocks may signal danger.

WE compiled the list of stocks that have at least 5% dividend yield and a minimum of 5% open short interest. These stocks may be substantially riskier than other high dividend yielding stocks:

Company

Ticker

Market Cap

Dividend Yield

Short Interest

PROSPECT CAPITAL CORP

PSEC

$1.1B

10.0%

10.2

CENTURYLINK INC

CTL

$12.4B

7.2%

10.0

FIRSTENERGY CORP

FE

$11.2B

6.0%

9.9

VALLEY NATIONAL BANCORP

VLY

$2.2B

5.3%

9.4

NATIONAL RETAIL PROPERTIES INC

NNN

$2.1B

6.1%

9.2

PITNEY BOWES INC

PBI

$5.0B

6.0%

9.2

FRONTLINE LTD

FRO

$1.9B

7.5%

9.2

LORILLARD INC

LO

$13.0B

5.8%

8.5

REGAL ENTERTAINMENT GROUP

RGC

$2.1B

6.1%

8.4

ENTERTAINMENT PROPERTIES

EPR

$2.1B

6.1%

8.2

U I L HOLDINGS CORP

UIL

$1.5B

5.9%

7.8

PEOPLES UNITED FINANCIAL INC

PBCT

$4.4B

5.0%

7.6

POTLATCH CORP NEW

PCH

$1.5B

5.3%

7.1

HEALTHCARE REALTY TRUST INC

HR

$1.5B

5.4%

7.0

H C P INC

HCP

$14.0B

5.1%

6.3

REDWOOD TRUST INC

RWT

$1.2B

6.3%

6.1

NORDIC AMERICAN TANKER SHPG

NAT

$1.2B

6.7%

5.8

FRONTIER COMMUNICATIONS

FTR

$8.0B

9.3%

5.5

D P L INC

DPL

$3.1B

5.0%

5.4

WASHINGTON REAL ESTATE INVS

WRE

$2.0B

5.8%

5.3

INTEGRYS ENERGY GROUP INC

TEG

$3.9B

5.5%

5.3

M F A FINANCIAL INC

MFA

$2.9B

11.4%

5.2

OMEGA HEALTHCARE INVESTORS

OHI

$2.3B

6.4%

5.2

PEPCO HOLDINGS INC

POM

$4.1B

5.9%

5.2

HATTERAS FINANCIAL CORP

HTS

$1.6B

14.1%

5.1

High short interest doesn’t always signal trouble. In merger arbitrage situations, hedge funds will short acquiring companies to capture the merger spread. First Energy recently acquired Allegheny Energy (AYE). Centurylink is acquiring Qwest (NYSE:Q). Lorillard (NYSE:LO) had a high short interest because of the possibility of adverse regulatory developments.

Disclosure: I am long Q, FTR, FE.

Source: 25 High Dividend Stocks Being Targeted By Short Sellers