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We like high dividend stocks because historically they outperformed the market and had lower risk. During the recent market turmoil, we encouraged investors to play defensively to protect themselves from potential inflation. However, under some circumstances, high dividend stocks might be dangerous. Such vulnerable high dividend stocks may be targeted by short sellers.

Below we compiled a list of high dividend stocks that are targeted by short sellers. All companies have a market cap of at least $2 billion, dividend yields higher than 5% 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 much riskier than other high dividend stocks:

Company Name

Symbol

Dividend Yield

52-week return

PEPCO HOLDINGS INC.

POM

5.70%

4.64%

CINCINNATI FINANCIAL

CINF

5.99%

-7.94%

WINDSTREAM CORP

WIN

7.77%

3.71%

OLD REPUBLIC INTL

ORI

7.35%

-29.14%

HCP INC

HCP

5.20%

-0.49%

FRONTIER COMM

FTR

10.71%

-12.06%

HIGHWOODS PROPERTIES

HIW

5.58%

-5.52%

CBL & ASSOCIATES

CBL

6.18%

0.07%

PITNEY BOWES INC.

PBI

7.37%

-4.29%

NATIONAL RETAIL PROP

NNN

5.78%

5.71%

High dividend stocks usually beat the market on the average. Unfortunately, these 10 stocks lost 4.53% over the past 52 weeks, including dividend payments. S&P 500 ETF (NYSEARCA:SPY) returned more than 7% during the same time frame. All 10 stocks on the list underperformed the market.

Except CINF, HCP and ORI, other stocks are not really favored by hedge funds, so they may be considered as short candidates. Here are the 10 dividend stocks short sellers are targeting:

Pepco Holdings Inc.: Pepco is engaged in the transmission, distribution and supply of electricity and the distribution and supply of natural gas. POM has a dividend yield of 5.70% and returned 4.64% during the past 52 weeks. It has an open short interest of 5.04% and its short interest increased by 3.43% during the past month. It has a market cap of $4.3B and a P/E ratio of 23.0.

Cincinnati Financial Corp.: Cincinnati Financial Corporation is engaged in property casualty insurance marketed through independent insurance agents in 39 states. CINF has a dividend yield of 5.99% and lost 7.94% during the past 52 weeks. It has an open short interest of 5.93% and its short interest increased by 4.46% during the past month. It has a market cap of $4.4B and a P/E ratio of 15.2. Jean-Marie Eveillard had $336 million invested in CINF (check out Eveillard’s top stock picks).

Windstream Corp.: Windstream Corporation is a communications and technology solutions provider. WIN has a dividend yield of 7.77% and returned 3.71% during the past 52 weeks. It has an open short interest of 6.06% and its short interest increased by 13.55% during the past month. It has a market cap of $6.6B and a P/E ratio of 23.3.

Old Republic International Corp.: Old Republic is engaged in the single business of insurance underwriting. ORI has a dividend yield of 7.35% and lost 29.14% during the past 52 weeks. It has an open short interest of 6.51% and its short interest increased by 2.10% during the past month. It has a market cap of $2.5B. Alan Fournier and Ric Dillon both invested more than $50 million in ORI (check out Dilon’s top stock picks).

HCP Inc.: HCP is a real estate investment trust. HCP has a dividend yield of 5.20% and lost 0.49% during the past 52 weeks. It has an open short interest of 7.49% and its short interest increased by 7.30% during the past month. It has a market cap of $15.0B and a P/E ratio of 33.1. D. E. Shaw invested $64 million in HCP stocks (check out Shaw’s top stock picks).

Frontier Communications Corp.: Frontier is a communications company providing services predominantly to rural areas and small and medium-sized towns and cities. FTR has a dividend yield of 10.71% and lost 12.06% during the past 52 weeks. It has an open short interest of 9.11% and its short interest increased by 72% during the past month. It has a market cap of $7.0B and a P/E ratio of 41.9.

Highwoods Properties Inc.: Highwoods Properties is a self-administered and self-managed equity real estate investment trust. HIW has a dividend yield of 5.58% and lost 5.52% during the past 52 weeks. It has an open short interest of 10.60% and its short interest increased by 20.75% during the past month. It has a market cap of $2.2B and a P/E ratio of 60.5.

CBL & Associates Properties Inc.: CBL is a self-managed, self-administered real estate investment trust. CBL has a dividend yield of 6.18% and returned 0.07% during the past 52 weeks. It has an open short interest of 12.02% and its short interest increased by 2.93% during the past month. It has a market cap of $2.0B and a P/E ratio of 61.9.

Pitney Bowes Inc.: Pitney Bowes provides mail processing equipment and integrated mail solutions. PBI has a dividend yield of 7.37% and lost 4.29% during the past 52 weeks. It has an open short interest of 12.27% and its short interest increased by 7.01% during the past month. It has a market cap of $4.1B and a P/E ratio of 11.8.

National Retail Properties Inc.: NNN is a fully integrated real estate investment trust. NNN has a dividend yield of 5.78% and returned 5.71% during the past 52 weeks. It has an open short interest of 14.42% and its short interest increased by 14.17% during the past month. It has a market cap of $2.5B and a P/E ratio of 32.5.

Source: 10 High Dividend Stocks Short Sellers Are Targeting