Short sellers have changed their bets in the high-dividend stocks now that the taxes are almost certain to change in this sector. We are seeing the bets against some of these great companies now running at the highs of 2012. We tracked the short interest changes from the December 14 settlement date versus the November 30 settlement date and added color on each if merited.
The top dividend stocks we are tracking in the short interest 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 large drop to 38.3 million shares as of the 12/14 settlement, versus 42.06 million shares short as of November 30. Altria yields about 5.6% because shares are now down about 14% from their recent peak.
American Electric Power Co. Inc. (NYSE: AEP) saw a boost of close to 20% in its short interest: up to 4.83 million shares short, versus 4.05 million shares short. This is still considerably lower than just about two months ago. AEP now yields about 4.4%.
Annaly Capital Management Inc. (NYSE: NLY) had been dropping in the short interest, but that was before this massive boost. Its short interest gained more than 40%, up to 35.2 million shares. While this is a huge number, it is more in line with prior months. The king of mortgage REITs has a current yield of about 12.3%.
AT&T Inc. (NYSE: T) saw another gain, this time a big one, to 66.34 million shares, versus 54.95 million shares at the end of November and 52.6 million shares short in mid-November. AT&T yields 5.3% and is a member of the Dogs of the Dow.
Duke Energy Corp. (NYSE: DUK) saw a drop in the short interest at the end of November, but that was after a huge gain a month earlier. Now we have a serious jump of 30% in the short interest to 9.098 million shares. The prior short interest of 6.904 million shares was down from 7.433 million shares in mid-November. The yield is about 4.7%, now that its stock is down about 10% from its 52-week high.
Kimberly-Clark Corp. (NYSE: KMB) saw a slight drop to 7.65 million shares short as of Mid-December, versus 8.07 million shares at the end of November. Kimberly-Clark yields 3.5%.
Kinder Morgan Energy Partners L.P. (NYSE: KMP) saw its short interest drop only marginally after a substantial drop before. The new mid-December short interest fell to 3.211 million units, versus 3.319 million units at the end of November and 4.295 million units short in mid-November. This is the lowest reading since the end of July. Its distribution rate, a yield-equivalent (before tax implications), is listed as 6.3%.
Merck & Co. Inc. (NYSE: MRK) is another of the Dogs of the Dow, and its short interest picked back up to 25.36 million shares short from 23.75 million shares short at the end of November. Merck’s dividend yield is close to 4.2%, now that shares are down more than 15% from the 52-week high.
Procter & Gamble Co. (NYSE: PG) saw another gain in the short interest, but it was too small to really attribute any color on the surface. Still, this was the highest short interest since the end of January. Its gain was to 22.047 million shares as of mid-December, versus 21.436 million shares short at the end of November. P&G’s dividend is about 3.3% since the stock pulled back a couple bucks off its year high.
Reynolds American Inc. (NYSE: RAI) saw its sixth consecutive rise in the short interest, up to 9.65 million shares short in mid-December, versus 9.584 million shares short at the end of November.This is actually its highest short interest of 2012. This one yields about 5.7%, now that shares have pulled back more than 10% from their recent highs.
Verizon Communications Inc. (NYSE: VZ) is another member of the Dogs of the Dow, and it saw a double-digit gain in the short interest to 51.97 million shares short at the mid-December date, versus 45.027 million shares short at the end of November. Actually, this was the highest short interest of 2012 for Verizon, and the telecom giant yields about 4.7%.
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