Big Short Interest Changes in High-Yield Dividend Stocks

The short interest data for the end of November is out, and the results are somewhat surprising when it comes to the top high-yield safe dividends out there. Some of the changes were substantial, and it seems as though hedgers and short sellers may have been making their moves for 2014 a bit early.

24/7 Wall St. has tracked the short interest in these top dividend stocks: Altria Group Inc. (NYSE: MO), AT&T Inc. (NYSE: T), General Electric Co. (NYSE: GE), Kimberly-Clark Corp. (NYSE: KMB), Merck & Co. Inc. (NYSE: MRK), Pfizer Inc. (NYSE: PFE), Procter & Gamble Co. (NYSE: PG) and Verizon Communications Inc. (NYSE: VZ). We have shown a comparison for the settlement date of November 29 to that of November 15, and we have added color to see what the drive for the short interest change may be.

It has been said before, and we will say it again. It takes much more conviction to short sell a high-yield dividend stock over a low-yield or non-dividend payer because the short seller is on the hook for dividend payments around ex-dividend dates, as well as the a broker loan-call rate to borrow the stock.

Altria Group Inc. (NYSE: MO) saw a big gain in the short interest to 29.15 million shares from 25.39 million. This is the highest short interest since April. Is it Altria’s long delay and slow entrance into the e-cigs market? Altria’s yield is back down to about 5.2% since the stock is back within about 2% of a 52-week high.

AT&T Inc. (NYSE: T) saw a slight uptick in the short interest to 131.4 million shares, versus 103.6 million shares. The move may seem too small to notice, but this was the highest short interest of the year. Maybe there is a concern that AT&T will make too large of a reach on an international acquisition. AT&T’s dividend is 5.1%, and it has the highest yield of all 30 DJIA stocks, making it the top position in the Dogs of the Dow yet again (and by far).

General Electric Co. (NYSE: GE) saw a sharp drop to 76.6 million shares at the end of November, versus 83.45 million two weeks earlier. This seems to reverse the big jump in the short interest seen in mid-November. The conglomerate’s stock kept putting in new highs, and we now know its plans for the consumer finance unit in 2014 and beyond. GE’s yield is down to 2.8% since its shares keep rising. We do expect a dividend hike announcement from GE imminently.

Kimberly-Clark Corp. (NYSE: KMB) saw a small gain in the short interest to 9.399 million shares, versus 9.078 million in mid-November. This marks the seventh consecutive report with a high short interest of more than 9 million shares. Its yield is about 3.0% now that shares are over $105.00. At least the stock has pulled back from its 52-week high of $111.68.

Big Pharma short changes: Merck & Co. Inc. (NYSE: MRK) saw its short interest jump handily to 31.33 million shares at the end of November, versus 25.686 million two weeks earlier. While this is a jump back up, it is still a fraction of the short interest seen earlier this year. Pfizer Inc. (NYSE: PFE) had a tiny drop, almost too small to notice: 58.096 million shares short at the end of November versus 58.866 million shares short in mid-November. Merck has a yield of 3.5%; Pfizer’s yield is 3.0%.

Procter & Gamble Co. (NYSE: PG) saw a move higher to 23.25 million shares short, versus 22.889 million shares short just two weeks earlier. It may be a small gain on the surface, but P&G’s short interest is now up at almost the highest reading since March or April. P&G’s dividend yield is 2.8%, because this stock is within 2% or so of its 52-week high of $85.82.

Verizon Communications Inc. (NYSE: VZ) saw a dip in its short interest (the opposite of AT&T) to 76.557 million shares at the end of November, versus 78.869 million shares in mid-November. What we would point out here, despite a small drop in the shares short, is that this is still the second highest short interest reading of 2013 for Verizon. Maybe the investors want more dividend growth in 2014, even after Verizon’s record bond offering needed to pay for its Vodafone deal. Verizon’s dividend yield is currently much lower than AT&T’s at 4.2%.