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Investors in dividend paying stocks might want to take a different approach to looking for stocks. Many stock traders look for short squeeze plays. These are stocks that have a large number of shares that have been shorted. Traders are hoping that on any good news, the short sellers will jump at buying in their shares, driving up the stock's price.

Short interest in a stock could indicate that the stock is well positioned for a short squeeze in the event a positive catalyst occur. A short squeeze takes place when a heavily shorted stock is quickly bought back in by the short-sellers in order to cover their bearish positions, driving the price of the stock up sharply. The most common measurement for short interest is the short ratio, which measures the numbers of days it would take the short-sellers to cover their positions based on recent average daily volume. Surprisingly, there are several high dividend stocks listed on some of the high yield lists at WallStreetNewsNetwork.com that have been heavily shorted.

For example, Rogers Communication (NYSE:RCI), the Canadian media company that yields 3.9%, has a Days to Cover Ratio, also known as a Short Interest Ratio, of 62.8. This means that if the short sellers decided to cover, it would take them almost 63 days to buy in their shares, based on the current daily volume of the stock. Rogers trades at 10.6 times forward earnings.

The egg distributor Cal-Maine Foods, Inc. (NASDAQ:CALM), has a short ratio of 27.1 and yields a generous 6.4%. The stock carries a forward price to earnings ratio of 15.

TransAlta Corp. (NYSE:TAC) is a non-regulated electric utility that generates electricity from coal, natural gas, hydroelectric, wind, geothermal, and biomass that yields 5.6%. The stock has a short ratio of 29.4 and a forward PE of 17.

Alexander's Inc. (NYSE:ALX), the real estate investment company that own New York real estate, has a yield of 2.9% and a short ratio of 29.8. The stock trades at 32 times earnings.

Disclosure: Author did not own any of the above at the time the article was written.

Source: High-Yield Short Squeeze Plays