Short Interest Screams Higher in Defensive High-Yield Stocks

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The short interest data for the first two weeks of June has been released. The results show that short interest was higher in almost all our go-to list of defensive high-yield stocks that are not utilities.

24/7 Wall St. would remind readers that short selling a high-dividend stock takes much more conviction and courage than short selling other stocks. On top of being short a stock, the short seller also assumes the liability of paying that dividend out on top of just the cost to borrow a stock.

Altria Group Inc. (NYSE: MO) saw a larger increase in the short interest in June than it saw even in May. The June 13 short interest was up more than 15% to 23,090,116 shares from 19,977,664 shares at the end of May. This is now the highest short interest of both 2014 and over the past year. We recently questioned why tobacco dividends are outyielding telecom dividends. Altria’s yield is down all the way to 4.5%, now that shares hit a new all-time high above $42.

AT&T Inc. (NYSE: T) saw its short interest rise more than 5% to 190,671,337 shares as of June 13. This was up from 180,971,612 shares in the short interest at the end of May. AT&T’s dividend yield is 5.2%, and it is valued at only 13 times expected 2014 earnings. We recently ran the analysis and saw that AT&T’s dividend is safe even after the DirecTV buyout, and AT&T was named as being among our own list of highest-yielding dividends that are safe to hold.

General Electric Co. (NYSE: GE) saw its short interest rise by almost 6% to 69,368,486 shares as of June 13, versus 65,480,818 shares at the end of May. GE’s common stock dividend yield now is 3.3%, since shares are back above $27.

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Kimberly-Clark Corp. (NYSE: KMB) saw a large jump in the short interest, by 13.5%, to 6,036,009 shares from 5,317,197 shares short at the end of May. This stock’s yield is down to 3%, now that its shares are at $111. Keep in mind that the end of May had the lowest short interest in a year for Kimberly-Clark.

Merck & Co. Inc. (NYSE: MRK) saw it short interest rise in the first two weeks of June. That short interest reading rose by almost 14% to 33,266,511 shares as of June 13. This was just 29,199,196 shares short at the end of May. Merck’s dividend yield is 3.0%, and it is valued at a somewhat expensive 17 times expected 2014 earnings.

Pfizer Inc. (NYSE: PFE) saw only a 0.1% gain in the short interest, up to 56,730,101 shares as of June 13, versus 56,694,370 shares as of May 30. Pfizer’s yield is still up at 3.5%, since shares have remained under $30 on worries that it will make an expensive overseas acquisition. Pfizer is valued at only 13 times expected 2014 earnings.

Procter & Gamble Co. (NYSE: PG) saw a large snapback in the short interest in June. The June 13 short interest rose by 11.3% to 17,288,510 shares from 15,531,412 shares short at the end of May. While this is a big jump, the May’s-end reading was the largest drop of all among these high-yield dividend stocks. The jump was also not even big enough to get the P&G short interest back to the 17,794,800 shares short as of May 15. P&G’s dividend yield is 3.2%, and the stock trades at an expensive 18.3 times expected earnings (blend of June 2014 and 2015 year-end).

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Verizon Communications Inc. (NYSE: VZ) saw only a 0.3% gain in the short interest, up to 36,454,115 as of June 13 from 36,337,821 shares as of May 30. Verizon’s dividend yield is currently much lower than AT&T’s at 4.3%, and Verizon trades at about 14 times expected 2014 earnings.