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When choosing a high dividend stock, it is important to look at the free cash flows that would be financing the dividend to assess whether it appears sustainable.

One appropriate measure is levered free cash flow, which is the free cash flow available after paying interest and re-paying necessary principal to bondholders. Levered free cash flow is the cash flow from which dividends are paid or earnings are retained (under the Board’s discretion).

Using levered free cash flow, we wanted to find attractive, high-dividend stocks, so we screened for those with significant amounts of levered free cash flow as a percentage of market cap.

Then we went one step further. Among this list of high cash, high dividend stocks, we found those with recent bullish sentiment, as indicated by significant drops in shares shorted month-over-month as a percentage of share float. The final list of 7 is below.



Do you think these are reliable income generators? Use this list as a starting-off point for your own analysis into income stocks.

List sorted by levered free cash flow as a percentage of market cap.

1. Weingarten Realty Investors (WRI): REIT. Market cap of $3.08B. Dividend yield at 4.41%. TTM levered free cashflow at $321.60M, which is 10.44% of market cap. Shares shorted have decreased from 10.52M to 9.82M month-over-month, which is a 0.63% decrease as a percent of a 110.26M share float. The stock is a short squeeze candidate, with a short float at 8.55% (equivalent to 11.01 days of average volume). The stock has gained 14.78% over the last year.



2. Lorillard, Inc. (LO): Cigarettes Industry. Market cap of $14.06B. Dividend yield at 5.32%. TTM levered free cashflow at $1.10B, which is 7.82% of market cap. Shares shorted have decreased from 15.43M to 13.63M month-over-month, which is a 1.24% decrease as a percent of a 145.21M share float. The stock appears to have good liquidity to back up its dividend-- current ratio at 2.06 and quick ratio at 1.86.



3. Omega Healthcare Investors Inc. (OHI): REIT. Market cap of $2.37B. Dividend yield at 6.43%. TTM levered free cashflow at $183.24M, which is 7.75% of market cap. Shares shorted have decreased from 5.03M to 4.75M month-over-month, which is a 0.29% decrease as a percent of a 98.14M share float. The stock has gained 26.88% over the last year.



4. Reynolds American Inc. (RAI):
Cigarettes Industry. Market cap of $20.93B. Dividend yield at 5.90%. TTM levered free cashflow at $1.58B, which is 7.55% of market cap. Shares shorted have decreased from 7.30M to 6.18M month-over-month, which is a 0.24% decrease as a percent of a 458.08M share float. The stock has gained 39.46% over the last year.

5. Mack-Cali Realty Corp. (CLI)
: REIT. Market cap of $2.93B. Dividend yield at 5.34%. TTM levered free cashflow at $211.60M, which is 7.23% of market cap. Shares shorted have decreased from 1.93M to 1.77M month-over-month, which is a 0.22% decrease as a percent of a 71.41M share float. The stock has gained 0.81% over the last year.

6. CMS Energy Corp. (CMS): Diversified Utilities Industry. Market cap of $4.74B. Dividend yield at 4.44%. TTM levered free cashflow at $304.75M, which is 6.43% of market cap. Shares shorted have decreased from 11.35M to 10.44M month-over-month, which is a 0.36% decrease as a percent of a 249.56M share float. The stock has gained 24.59% over the last year.

7. Southern Copper Corp. (SCCO): Copper Industry. Market cap of $30.40B. Dividend yield at 5.12%. TTM levered free cashflow at $1.53B, which is 5.03% of market cap. Shares shorted have decreased from 4.91M to 4.29M month-over-month, which is a 0.37% decrease as a percent of a 169.19M share float. The stock is currently stuck in a downtrend, trading 6.64% below its SMA20, 10.22% below its SMA50, and 5.47% below its SMA200. It's been a rough couple of days for the stock, losing 7.79% over the last week.

*Levered free cashflow and short data sourced from Yahoo! Finance, dividend yield and all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 7 Cash-Rich, High Dividend Stocks Seeing Short Covering