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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 the Fed’s inflationary monetary policy and want to protect ourselves against inflation. One of the ways we can do this without assuming significant risks is by 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.

We compiled the list of stocks that have at least 5% dividend yield and a minimum of 5% open short interest. We also require that the short interest has been increasing compared with the previous month. These stocks may be substantially riskier than other high dividend yielding stocks:

Company Name

Symbol

Dividend Yield

52-Week Return

FRONTIER COMMUNICATIONS

FTR

11.1

-2.69%

HATTERAS FINANCIAL CORP

HTS

15.1

6.66%

TAL INTERNATIONAL GROUP

TAL

7.7

4.32%

COLONY FINANCIAL INC

CLNY

7.8

-12.04%

PITNEY BOWES INC.

PBI

7.4

-1.07%

ENTERTAINMENT PROP

EPR

7.0

-3.69%

LEXINGTON REALTY TRUST

LXP

6.5

6.04%

FIFTH STREET FINANCE CORP

FSC

13.5

-5.28%

OVERSEAS SHIPHOLDING GR

OSG

8.3

-46.31%

FRONTLINE LTD

FRO

14.3

-73.48%

EMPIRE DISTRICT ELECTRIC CO.

EDE

6.6

2.80%

UIL HOLDINGS CORP

UIL

5.4

19.54%

HCP INC

HCP

6.0

-4.26%

WEINGARTEN REALTY INVES

WRI

5.1

6.62%

R.R. DONNELLEY & SONS CO

RRD

6.7

-13.90%

BLACK HILLS CORP

BKH

5.1

-10.50%

REGAL ENTERTAINMENT GROUP

RGC

6.9

-4.14%

VALLEY NATIONAL BANCORP

VLY

5.7

-14.20%

WESTAR ENERGY INC.

WR

5.3

4.04%

GARMIN LTD

GRMN

5.0

6.35%

High dividend stocks usually beat the market on the average. Unfortunately, these 20 stocks lost 6.76 % over the past 52 weeks, including dividend payments. S&P 500 ETF (NYSEARCA:SPY) returned more than 6% during the same time frame. Sixteen of the 20 stocks on the high dividend stocks list underperformed the broader 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. As of the end of the most recent reporting period, Leon Cooperman’s Omega Advisors and Ken Griffin's Citadel had Regal Entertainment in their portfolios. Uil Holdings saw a nearly 20% return in the past year. A clear winner of this may be Jim Simons' Renaissance Technologies, which had more than 280,000 shares as of the end of March.

More hedge funds own Tal International than any other stock on the list. Israel Englander's Millennium Management added the stock, nearly 200K, in the most recent quarter. Cliff Asness's AQR Capital Management increased the position by 40%, making his total about 161K shares. Fifteen of the more than 300 hedge funds that we follow own RRD. George Soros's Soros Fund Management and Ray Dalio's Bridgewater each have more than 100K shares. Steve Cohen's SAC Capital Advisors decreased his position in TAL by 84% in the most recent quarter, bringing his total to about 21k shares, valued at nearly $548 Million.

The other companies aren’t really favored by hedge funds, so they may be considered as short candidates.


Disclosure: I am long FTR.

Source: 20 High Dividend Stocks Short Sellers Are Targeting