Short Sellers Pounce on High-Yield Dividend Stocks (MO, AEP, NLY, T, DUK, KMB, KMP, MRK, PG, RAI, VZ)
Nov 28th 2012 8:00AM
Short sellers have lightened up on some high dividend stocks while picking up bets against others. It is almost as if they are mixed in bets against higher dividend taxes coming in 2013. We tracked the big short interest changes in the following 10 big dividend stocks by comparing the November 15 settlement date with the October 31 settlement date. We also added color if applicable.
The top dividend stocks we are tracking the short interest in are as follows: 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 gain in the short interest of more than 4% to 41.81 million shares. This is the highest in about two months, and Altria yields about 5.3% now that shares have recovered about 8% in the past two weeks.
American Electric Power Co. Inc. (NYSE: AEP) saw a huge drop in the short interest as the 10% correction may have been enough to entice new buyers. Its short interest fell to 4.44 million shares from 6.53 million shares. This is now only 1.64 days to cover and AEP yields about 4.5%.
Annaly Capital Management Inc. (NYSE: NLY) saw a drop of close to 10% in its short interest as the mid-November level was 26.82 million shares, down from 20.63 million shares at the end of October. Actually, this was the lowest short interest in Annaly all year! This is supposed to be the safest of the high payout mortgage REIT sector, and its stock has recovered about one-fourth of its losses from the peak. With a whopping 13.6% implied dividend yield, being short this stock requires some extraordinary conviction.
AT&T Inc. (NYSE: T) saw close to a double-digit gain in its short interest, up to 52.6 million shares short in mid-November, versus 48.32 million shares short as of the end of October. AT&T's current dividend has been accelerated and screens at 5.3% today but will be higher at the next payout.
Duke Energy Corp. (NYSE: DUK) saw a huge gain in the short interest, with a gain of 23.5% to 7.433 million shares. Keep in mind that this is far smaller than when it was an arbitrage play earlier this year. Its yield is about 5% now that its stock is down about $10 from its 52-week high.
Kimberly-Clark Corp. (NYSE: KMB) saw a tiny drop in the short interest to 7.296 million shares short, versus 7.33 million shares at the end of October. This is a low in the short interest going back to April. Kimberly-Clark yields 3.4%.
Kinder Morgan Energy Partners L.P. (NYSE: KMP) saw its short interest rise only marginally to 4.29 million units from 4.268 million at the end of October. While small, this is still the highest short interest since mid-March. Its distribution rate, a yield-equivalent (before tax implications), is listed as 6.2%.
Merck & Co. Inc. (NYSE: MRK) has just raised its dividend again and the short interest did not reflect that due to it being two weeks before the news. This dropped to 25.45 million in the mid-November short interest, versus 26.97 million shares in the short interest at the end of October. Its 3.8% dividend yield is soon to be closer to 4% after the hike takes effect.
Procter & Gamble Co. (NYSE: PG) saw its short interest tick down by about 2% to 20.363 million shares in mid-November from 20.743 million shares at the end of October. The peak in its short interest was 22.96 million shares short at the end of September when activist pressure was more fresh. P&G's dividend is about 3.2% now that shares are close to $69.
Reynolds American Inc. (NYSE: RAI) saw yet another gain in the short interest, its fourth consecutive gain and the highest short interest since May, to 9.34 million shares short in mid-November, versus 8.87 million shares short at the end of October. This one yields about 5.5%.
Verizon Communications Inc. (NYSE: VZ) saw another small uptick in the short interest to 47.65 million shares in mid-November, versus 46.35 million shares short at the end of October. This is the second highest short interest of the year, and it yields about 4.8%.
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
Filed under: 24/7 Wall St. Wire, Active Trader, Dividends & Buybacks, Short Interest Tagged: AEP, DUK, KMB, KMP, MO, MRK, NLY, PG, RAI, T, VZ