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We like high dividend stocks because historically they have outperformed the market and have had lower risk. We are concerned about the Fed’s inflationary policy, and therefore, we encourage 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 (%)

YTD Return

Short Interest

CBL & Associates Properties Inc.

(CBL)

5.388

-7.56%

11.84%

Duke Realty Corp.

(DRE)

5.497

5.01%

9.25%

Entertainment Properties Trust

(EPR)

6.294

2.13%

9.50%

Health Care REIT Inc.

(HCN)

5.449

15.69%

8.01%

Lockheed Martin Corporation

(LMT)

5.288

11.43%

6.46%

Realty Income Corp.

(O)

5.117

3.40%

5.68%

Old Republic International Corp.

(ORI)

7.071

-23.90%

5.33%

R.R. Donnelley & Sons Company

(RRD)

6.369

-2.45%

9.92%

Valley National Bancorp

(VLY)

5.437

-2.76%

11.56%

Washington Real Estate Investment Trust

(WRE)

5.604

4.28%

8.81%

High dividend stocks usually beat the market on the average. Unfortunately, these 10 stocks only returned 0.53% over the past 52 weeks, including dividend payments. S&P 500 ETF (SPY) returned about 2.72% during the same time frame.

Except Lockheed Martin (LMT), which was held by 34 hedge funds tracked by Insider Monkey at the end of June, other stocks are not really favored by hedge fund managers. Less than 10 hedge funds were bullish about Washington Real Estate (WRE), Entertainment Properties Trust (EPR) and Realty Income (O). Ten to Twelve hedge funds had Health Care REIT (HCN), Duke Realty (DRE), CBL & Associates (CBL), Old Republic International (ORI) and Valley National (VLY) in their portfolio, and sixteen had R.R. Donnelley & Sons (RRD). Here are the 10 dividend stocks short sellers are targeting:

CBL & Associates Properties Inc: CBL is a self-managed, self-administered real estate investment trust. CBL has a dividend yield of 5.39% and lost 7.56% since the beginning of this year. It has an open short interest of 11.84%, and its short interest increased by 6.15% during the past month. It has a market cap of $2.3B and an extremely high P/E ratio of 129.42. Israel Englander decreased his position in CBL by 46% over the second quarter.

Duke Realty Corp: Duke Realty Corporation is a self-administered and self-managed real estate investment trust. DRE has a dividend yield of 5.50% and returned 5.01% since the beginning of this year. It has an open short interest of 9.25% and its short interest increased by 17.77% during the past month. It has a market cap of $3.2B and a high PE ratio of 139.67. D. E. Shaw and Jim Simons decreased their position in the stock by 31% and 23% respectively during the second quarter.

Entertainment Properties Trust: Entertainment Properties Trust is a self-administered real estate investment trust. EPR has a dividend yield of 6.29% and returned 2.13% since the beginning of this year. It has an open short interest of 9.50%, and its short interest increased by 1.74% during the past month. It has a market cap of $2.1B and a P/E ratio of 36.6. Only seven hedge funds tracked by Insider Monkey had EPR in their portfolio.

Health Care REIT Inc: Health Care REIT, Inc. is a real estate investment trust engaged in senior housing and health care real estate. HCN has a dividend yield of 5.45% and returned 15.69% since the beginning of this year. It has an open short interest of 8.01%, and its short interest increased by 4.01% during the past month. It has a market cap of $9.4B, and an extremely high P/E ratio of 229.52. Jacob Gottlieb decreased his HCN position by 60% over the second quarter. Israel Englander also reduced his position by 26%.

Lockheed Martin Corporation: Lockheed Martin Corporation is a security company engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems and products. LMT has a dividend yield of 5.29% and returned 11.43% since the beginning of this year. It has an open short interest of 6.46% and its short interest increased by 2.01% during the past month. It has a market cap of $25.4B and a P/E ratio of 10.02. Jean-Marie Eveillard had $278 million LMT stocks.

Realty Income Corp: Realty Income Corporation operates as an equity real estate investment trust. O has a dividend yield of 5.12% and returned 3.40% since the beginning of this year. It has an open short interest of 5.68% and its short interest increased by 0.56% during the past month. It has a market cap of $4.5B and a P/E ratio of 33.71. Only seven hedge funds had O in their portfolio at the end of the second quarter.

Old Republic International Corp.: Old Republic is engaged in the single business of insurance underwriting. ORI has a dividend yield of 7.07% and lost 23.90% since the beginning of this year. It has an open short interest of 5.33%, and its short interest increased by 4.37% during the past month. It has a market cap of $2.6B. Alan Fournier and Ric Dillon both invested more than $50 million in ORI. Alan Fournier decreased his position in the stock by 5% over the second quarter.

R.R. Donnelley & Sons Company: RR Donnelley is a global provider of integrated communications. RRD has a dividend yield of 6.37% and lost 2.45% since the beginning of this year. It has an open short interest of 9.92%, and its short interest increased by 6.03% during the past month. It has a market cap of $3.1B and a P/E ratio of 26.77. George Soros reduced his RRD position by 5% over the second quarter.

Valley National Bancorp: Valley is a bank holding company. VLY has a dividend yield of 5.44% and lost 2.76% since the beginning of this year. It has an open short interest of 11.56%, and its short interest increased by 1.47% during the past month. It has a market cap of $2.2B and a P/E ratio of 14.93. Ken Griffin and Jim Simons had 0.01% and 0.02% respectively of their portfolio invested in VLY.

Washington Real Estate Investment Trust: Washington Real Estate Investment Trust is a self-administered, self-managed, equity real estate investment trust. WRE has a dividend yield of 5.60% and returned 4.28% since the beginning of this year. It has an open short interest of 8.81%, and its short interest increased by 16.72% during the past month. It has a market cap of $2.0B and an extremely high P/E ratio of 134.61. Ken Griffin, Jim Simons and D. E. Shaw all reduced their position in the stock by over 80% in the second quarter.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 10 High Dividend Stocks Short Sellers Are Targeting