Short Sellers Change Bets Against High-Yield Dividend Stocks (MO, AEP, NLY, T, DUK, KMB, KMP, MRK, PG, RAI, VZ)

Investing

Published: November 12, 2012 10:35 am

Last Updated: April 14, 2020 4:07 pm

Short sellers took into consideration that taxes will be going up for many dividend investors. We have tracked the changes in the October 31 settlement date, versus the October 15 settlement date, for the short interest, and the changes in some of these high dividend stocks are massive. We had been warning readers about a dividend bubble for some time and now we have seen this bubble deflate in many cases.

We tracked the big short interest changes in the following 10 big dividend stocks: Altria Group Inc. (NYSE: MO), American Electric Power Co. Inc. (NYSE: AEP), Annaly Capital Management Inc. (NYSE: NLY), AT&T Inc. (NYSE: T), Duke Energy Corp. (NYSE: DUK), Kimberly Clark Corp. (NYSE: KMB), Kinder Morgan Energy Partners L.P. (NYSE: KMP), Merck & Co. Inc. (NYSE: MRK), Procter & Gamble Co. (NYSE: PG), Reynolds American Inc. (NYSE: RAI) and Verizon Communications Inc. (NYSE: VZ).

Altria Group Inc. (NYSE: MO) saw a tiny drop in the short interest ahead of the election, but at 39.81 million shares, versus 39.84 million shares short, this might as well be considered unchanged. Altria yields about 5.6% again now that shares are down 13% from their peak.

American Electric Power Co. Inc. (NYSE: AEP) saw nearly a 7% rise in the short interest to 6.536 million shares, versus 6.116 million shares. AEP yields 4.5%, and the utility is down almost 10% from its 52-week high.

Annaly Capital Management Inc. (NYSE: NLY) is supposed to be the safest of the high payout mortgage REIT sector, but its stock has had a hard time holding up recently. What is odd is that the short sellers fled out of this stock as perhaps the price was getting low enough. The short interest fell by about 15% to 30.6 million shares from 36.5 million shares. This payout is still well into the double-digit territory.

AT&T Inc. (NYSE: T) saw a massive drop at the prior report, but this report was only less than 1% lower, as the short interest was 48.33 million shares at the end of October, versus 48.67 million shares short in mid-October. This was just above an earlier-than-expected dividend hike, but its current dividend had been listed at about 5.4%.

Duke Energy Corp. (NYSE: DUK) saw a 4.5% gain in the short interest to 6.10 million shares. Its yield is close to 4.9% now that it is $10 off its 52-week high.

Kimberly-Clark Corp. (NYSE: KMB) saw another drop in the short interest, down to 7.33 million shares from 8.47 million shares. That represents a decline of about 13.5% in the short sellers willing to bet against this defensive consumer products company. The yield here is 3.6%.

Kinder Morgan Energy Partners L.P. (NYSE: KMP) saw its short interest rise to 4.27 million shares (units) at the end of October, versus 3.93 million shares (units) short in the middle of October. That is a gain of about 8.6% in the short interest. This is a “distribution” rather than a true dividend yield, but it still screens out at 6.3% now that its units are well off of their highs.

Merck & Co. Inc. (NYSE: MRK) saw a 7% jump in the short interest to 26.97 million shares, versus 23.02 million shares. Merck yields 3.8%.

Procter & Gamble Co. (NYSE: PG) saw its short interest rise and take back half of its prior losses. This rose back up to 20.74 million shares from 18.6 million shares short, but this is still down from 22.96 million shares short at the end of September. P&G’s dividend is about 3.4%.

Reynolds American Inc. (NYSE: RAI) saw its third gain in the short interest, to 8.87 million shares versus 8.46 million shares in the prior period. Reynolds has a yield of about 5.7%.

Verizon Communications Inc. (NYSE: VZ) saw a small recovery in the bets against the stock as the short interest rose to 46.35 million shares, versus 46.07 million shares. Verizon’s dividend yield is close to 4.8% now.

As a reminder, it takes a lot more conviction to short a stock that has a very high dividend. On top of having to pay a broker loan-call rate to borrow the stock, the dividend payouts and the ex-dates play into the equation as well.

JON C. OGG

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