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Company debt is a wedge between company cash flows and dividends to shareholders. Because debtholders are always paid before shareholders, high company debt can threaten the existence of a company’s dividend. Therefore, if you are looking for dividend stocks, pay attention to the amount of debt the company is holding.

With this idea in mind, we screened for dividend stocks paying yields above 2% and sustainable payout ratios below 35%. We searched this universe for stocks that have seen significant decreases in shares shorted month-over-month, a bullish change in outlook.

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 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 companies pay reliable dividends? Use this list as a starting-off point for your own analysis.

List sorted by decrease in shares shorted as a percent of share float.

1. WGL Holdings Inc. (NYSE:WGL): Gas Utilities Industry. Market cap of $2.02B. Dividend yield at 3.92%, payout ratio at 26.03%. MRQ total debt to assets at 0.18. Shares shorted have decreased to 2.41M from 3.16M, a change representing 1.47% of the company's 50.91M share float. The stock has gained 17.43% over the last year.

2. Meredith Corp. (NYSE:MDP): Publishing Industry. Market cap of $1.39B. Dividend yield at 3.34%, payout ratio at 30.39%. MRQ total debt to assets at 0.13. Shares shorted have decreased to 7.02M from 7.57M, a change representing 1.41% of the company's 39.07M share float. The stock is a short squeeze candidate, with a short float at 25.16% (equivalent to 12.24 days of average volume). The stock has gained 0.72% over the last year.

3. Artio Global Investors Inc. (NYSE:ART): Asset Management Industry. Market cap of $673.25M. Dividend yield at 2.13%, payout ratio at 15.90%. MRQ total debt to assets at 0.14. Shares shorted have decreased to 2.35M from 2.67M, a change representing 1.13% of the company's 28.28M share float. Might be undervalued at current levels, with a PEG ratio at 0.64, and P/FCF ratio at 9.22. The stock is a short squeeze candidate, with a short float at 7.53% (equivalent to 8.24 days of average volume). The stock has performed poorly over the last month, losing 11.99%.

4. Maiden Holdings, Ltd. (NASDAQ:MHLD): Property & Casualty Insurance Industry. Market cap of $700.19M. Dividend yield at 2.89%, payout ratio at 26.09%. MRQ total debt to assets at 0.07. Shares shorted have decreased to 1.85M from 2.29M, a change representing 0.87% of the company's 50.62M share float. Exhibiting strong upside momentum--currently trading 5.78% above its SMA20, 12.3% above its SMA50, and 24.15% above its SMA200. The stock has gained 58.66% over the last year.

5. Northrop Grumman Corporation (NYSE:NOC): Conglomerates Industry. Market cap of $18.65B. Dividend yield at 2.80%, payout ratio at 27.82%. MRQ total debt to assets at 0.15. Shares shorted have decreased to 23.92M from 26.13M, a change representing 0.76% of the company's 291.85M share float. The stock is a short squeeze candidate, with a short float at 8.66% (equivalent to 10.87 days of average volume). The stock has gained 40.29% over the last year.

6. American Greetings Corp. (NYSE:AM-OLD): Business Services Industry. Market cap of $931.34M. Dividend yield at 2.63%, payout ratio at 18.72%. MRQ total debt to assets at 0.15. Shares shorted have decreased to 6.77M from 6.98M, a change representing 0.57% of the company's 36.89M share float. The stock is a short squeeze candidate, with a short float at 18.38% (equivalent to 23.91 days of average volume). The stock has gained 19.96% over the last year.

7. Whirlpool Corp. (NYSE:WHR): Appliances Industry. Market cap of $6.0B. Dividend yield at 2.19%, payout ratio at 19.53%. MRQ total debt to assets at 0.16. Shares shorted have decreased to 6.44M from 6.75M, a change representing 0.41% of the company's 75.80M share float. The stock has lost 11.14% over the last year.

8. The Allstate Corporation (NYSE:ALL): Property & Casualty Insurance Industry. Market cap of $15.70B. Dividend yield at 2.81%, payout ratio at 21.20%. MRQ total debt to assets at 0.05. Shares shorted have decreased to 7.28M from 8.44M, a change representing 0.22% of the company's 522.47M share float. The stock has gained 6% over the last year.

*Short data sourced from Yahoo! Finance, total debt to assets sourced from Screener.co, all other data sourced from Finviz.

Source: 8 Low-Debt Dividend Stocks With Bullish Short Trends