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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 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.

Since we are a source for free insider trading data, we compiled this list of stocks that have at least a 5% dividend yield and a minimum of 5% open short interest. We also require that the short interest has been increasing compared to the previous month. These stocks may be substantially riskier than other high dividend yielding stocks:

Company Name

Symbol

Dividend Yield (%)

52-week Return

HATTERAS FINANCIAL

HTS

14.1

20.9%

FIFTH STREET FINANCE

FSC

9.6

13.3%

PDL BIOPHARMA

PDLI

9.3

10.5%

FRONTIER COMM.

FTR

9.1

13.0%

VECTOR GROUP

VGR

8.7

21.3%

FRONTLINE LTD

FRO

8.4

-33.1%

GETTY REALTY CORP.

GTY

7.6

7.1%

NORDIC AMERICAN TANKER

NAT

7.4

-21.5%

CAL MAINE FOODS INC

CALM

6.5

-13.6%

MEDICAL PROPERTIES TRUST

MPW

6.5

27.0%

REDWOOD TRUST INC.

RWT

6.3

0.4%

OVERSEAS SHIPHOLDING

OSG

6.3

-40.8%

REGAL ENTERTAINMENT

RGC

6.1

-17.2%

PITNEY BOWES INC.

PBI

6.0

1.2%

NEW YORK COMMUNITY BANCORP

NYB

6.0

6.3%

ENTERTAINMENT PROPERTIES

EPR

5.9

8.9%

NATIONAL RETAIL PROPERTIES

NNN

5.8

14.8%

PEPCO HOLDINGS INC.

POM

5.6

23.2%

PARK NATIONAL CORP

PRK

5.4

4.5%

UIL HOLDINGS CORP

UIL

5.4

15.2%

HEALTHCARE REALTY TRUST

HR

5.3

-3.2%

RAMCO-GERSHENSON PROPERTIES

RPT

5.1

5.2%

CINCINNATI FINANCIAL

CINF

5.1

14.7%

VALLEY NATIONAL BANCORP

VLY

5.0

-4.1%

High dividend stocks usually beat the market on the average. Unfortunately, these 24 stocks returned 3.1% over the past 52 weeks, including dividend payments. S&P 500 index returned more than 15% during the same time frame. Twelve of the top 15 high dividend stocks in this list underperformed the market.

The companies in this list are mainly real estate trusts, financials, and shipping companies. Some of these companies are favored by prominent hedge fund managers. PDL Biopharma is in Jim Simons’ and Seth Klarman’s portfolios. I would think twice about shorting any company that Seth Klarman is bullish about. Glenview’s Larry Robbins is very bullish about PBI. He had $87 Million in this stock. Leon Cooperman’s Omega Advisors and Roberto Mignone’s Bridger had Regal Entertainment in their portfolios. The other companies aren’t really favored by hedge funds, so they may be considered as short candidates.

Disclosure: I am long FTR.

Source: 24 High Dividend Stocks Being Targeted by Short Sellers