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When a stock becomes highly shorted, it may indicate a short squeeze opportunity. As there are fewer short sellers to sell the stock, any move up can trigger a short squeeze in which short sellers must close out their positions, which puts even more upward pressure on the stock price.

From the perspective of an investor searching for dividend income, we wanted to search for potential short squeeze opportunities from dividend stocks.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.


We began by looking for dividend stocks (with dividend yields above 2% and sustainable payout ratios below 35%) that have low company debt (with most recent quarter total debt-to-assets below 0.2). From these stocks, we searched for those with significant increases in shares shorted month-over-month.

We also created a price-weighted index of the stocks mentioned below, and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

click to enlarge


Do you think these stocks are on the cusp of a short squeeze? Use this list as a starting-off point for your own analysis. List sorted by dividend yield:

1. Cal-Maine Foods, Inc. (NASDAQ:CALM): Farm Products Industry. Market cap of $764.32M. Shares shorted have increased from 4.84M to 5.03M month-over-month, a change representing 1.36% of the company's 14.00M share float. Current dividend yield at 5.89%. MRQ payout ratio at 33.32%. MRQ total debt/total assets at 0.16. The stock is a short squeeze candidate, with a short float at 37.36% (equivalent to 39.41 days of average volume).

2. Republic Bancorp Inc. (NASDAQ:RBCAA): Regional Banks Industry. Market cap of $423.41M. Shares shorted have increased from 470.03K to 521.89K month-over-month, a change representing 0.51% of the company's 10.18M share float. Current dividend yield at 2.84%. MRQ payout ratio at 4.15%. MRQ total debt/total assets at 0.09. The stock is a short squeeze candidate, with a short float at 5.44% (equivalent to 11.61 days of average volume).

3. Horace Mann Educators Corp. (NYSE:HMN):
Property & Casualty Insurance Industry. Market cap of $631.70M. Shares shorted have increased from 1.01M to 1.13M month-over-month, a change representing 0.30% of the company's 39.69M share float. Current dividend yield at 2.79%. MRQ payout ratio at 17.56%. MRQ total debt/total assets at 0.03. The stock has had a couple of great days, gaining 5.95% over the last week.

4. Foot Locker, Inc. (NYSE:FL): Apparel Stores Industry. Market cap of $3.71B. Shares shorted have increased from 7.45M to 8.16M month-over-month, a change representing 0.47% of the company's 151.73M share float. Current dividend yield at 2.75%. MRQ payout ratio at 26.93%. MRQ total debt/total assets at 0.04. The stock has gained 24.81% over the last year.

5. Gap Inc. (NYSE:GPS): Apparel Stores Industry. Market cap of $10.06B. Shares shorted have increased from 26.90M to 33.11M month-over-month, a change representing 1.42% of the company's 436.87M share float. Current dividend yield at 2.47%. MRQ payout ratio at 27.47%. MRQ total debt/total assets at 0.16. The stock has lost 16.11% over the last year.

6. V.F. Corporation (NYSE:VFC): Textile Clothing Industry. Market cap of $12.19B. Shares shorted have increased from 4.37M to 4.80M month-over-month, a change representing 0.39% of the company's 108.90M share float. Current dividend yield at 2.27%. MRQ payout ratio at 34.22%. MRQ total debt/total assets at 0.15. The stock has had a couple of great days, gaining 5.96% over the last week.

7. Analog Devices Inc. (NASDAQ:ADI):
Semiconductor Industry. Market cap of $11.98B. Shares shorted have increased from 5.98M to 6.75M month-over-month, a change representing 0.26% of the company's 293.75M share float. Current dividend yield at 2.21%. MRQ payout ratio at 27.26%. MRQ total debt/total assets at 0.18. The stock has had a couple of great days, gaining 7.1% over the last week.

8. Tower Group Inc. (NASDAQ:TWGP): Property & Casualty Insurance Industry. Market cap of $985.31M. Shares shorted have increased from 4.27M to 4.39M month-over-month, a change representing 0.32% of the company's 37.47M share float. Current dividend yield at 2.19%. MRQ payout ratio at 19.92%. MRQ total debt/total assets at 0.09. The stock is a short squeeze candidate, with a short float at 11.69% (equivalent to 15.24 days of average volume).

9. Quaker Chemical Corporation (NYSE:KWR): Specialty Chemicals Industry. Market cap of $549.59M. Shares shorted have increased from 421.63K to 533.10K month-over-month, a change representing 0.93% of the company's 12.03M share float. Current dividend yield at 2.17%. MRQ payout ratio at 26.07%. MRQ total debt/total assets at 0.18. This is a risky stock that is significantly more volatile than the overall market (beta = 2.51). The stock has had a couple of great days, gaining 7.38% over the last week.

10. Computer Sciences Corporation (NYSE:CSC):
Information Technology Services Industry. Market cap of $5.94B. Shares shorted have increased from 4.46M to 4.89M month-over-month, a change representing 0.28% of the company's 154.64M share float. Current dividend yield at 2.09%. MRQ payout ratio at 19.62%. MRQ total debt/total assets at 0.16. Might be undervalued at current levels, with a PEG ratio at 0.94, and P/FCF ratio at 10.91. The stock has lost 21.92% over the last year.

11. Atlas Energy, Inc. (NYSE:ATLS): Gas Utilities Industry. Market cap of $1.12B. Shares shorted have increased from 657.36K to 1.10M month-over-month, a change representing 1.88% of the company's 23.52M share float. Current dividend yield at 2.02%. MRQ payout ratio at 22.0%. MRQ total debt/total assets at 0.19. This is a risky stock that is significantly more volatile than the overall market (beta = 2.65). The stock has gained 46.64% over the last year.

*Short data sourced from Yahoo! Finance, dividend data sourced from Screener.co, 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: Squeeze Ideas: 11 Low-Debt Dividend Stocks with Increasing Short Interest