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High dividend stocks historically performed better than the market and had lower volatility. They are good alternatives to Treasury bonds, especially in inflationary environments. We are concerned about the Fed's expansionary monetary policy, and we have been recommending investors to play defensively by purchasing stocks with high dividends. However, not all dividend stocks are worth investing in. Some of them are actually risky. That's why investors should research these stocks carefully before investing. One of the most practical ways of avoiding vulnerable dividend stocks is to check out the ones that are targeted by short-sellers.

Below we compiled a list of dividend stocks that short sellers are targeting. All companies have a market cap of at least $5 billion, a dividend yield higher than 3% and a minimum of 4% open short interest. The short interest of these stocks has been increasing over the previous month. The market data is obtained from Fidelity.

Company

Symbol

Dividend Yield (%)

Short Interest (%)

% Chg in Short Interest

EXELON CORP

EXC

5.28

5.77

2.23

WINDSTREAM CORP

WIN

8.28

6.07

8.85

KIMCO REALTY CORP

KIM

4.41

4.56

3.35

HEALTH CARE REIT INC.

HCN

5.15

5.73

3.96

CAMPBELL SOUP CO

CPB

3.57

4.79

1.81

FRONTIER COMM

FTR

14.72

7.44

100

MICROCHIP TECH

MCHP

3.91

10.25

1.6

DARDEN RESTAURANTS

DRI

3.86

7.88

20.57

Frontier Communications Corp's (NASDAQ:FTR) short interest changed the most from the previous month. Frontier provides communication services mainly to rural areas and small and medium-sized towns and cities. For the three months ending September 30, 2011, the company had net income of $20 million, compared with $29 million for the same quarter in 2010. Though FTR has a high dividend yield of 14.72%, short-sellers are still targeting it. It has an open short interest of 7.44% and its short interest doubled over the past month. FTR has a market cap of $5B and a P/E ratio of 33.71. During the third quarter, Paul Tudor Jones' Tudor Investment Corp and four other hedge funds sold out their FTR stakes.

Short-sellers are also targeting Exelon Corp (NYSE:EXC), a utility services holding company. Exelon reported net income of $601 million for the third quarter of 2011, down from $845 million for the same quarter in 2010. It has an open short interest of 5.77% and the short interest increased 2.23% during the past month. EXC has a market cap of $26.3B and a P/E ratio of 10.94. During the third quarter, Ken Griffin's Citadel Investment Group reduced its EXC stakes by 99%. The fund also reduced its position in EXC calls by 2% and had $5.2 million invested in the put options of EXC.

Another dividend stock that short sellers are targeting is Windstream Corp (NASDAQ:WIN), which has an open short interest of 6.07%. The short interest of WIN increased by 8.85% over the past month. Windstream is a provider of communications and technology solutions. It is specialized in complex data, high-speed internet access, and voice and transport services. The company reported net income of $71.5 million for the third quarter of 2011, versus $85.2 million in the same quarter a year earlier. Jim Simons' Renaissance Technologies significantly reduced its WIN stakes by 81% over the third quarter last year. D. E. Shaw's D E Shaw and Louis Navellier's Navellier & Associates also reduced their WIN positions in the third quarter.

Other dividend stocks short sellers are targeting include Kimco Realty Corp (NYSE:KIM), Health Care REIT Inc (NYSE:HCN), Campbell Soup Co (NYSE:CPB), Microchip Technology Inc (NASDAQ:MCHP), and Darden Restaurants Inc (NYSE:DRI). We think investors should be cautious about these stocks. They should also consider reducing some of these stocks targeted by short-sellers.

Source: 8 High-Dividend Short-Selling Targets