The short interest data for the July 29 settlement date are out. Investors and traders alike need to know that the short sellers are now fighting the market at all-time highs. It is also the case that many of the market’s high-yield defensive dividend stocks are close to highs as well.
The July 29 settlement data almost feels like short sellers are getting a bit panicked about the market rally. The flight was not massive, but those short sellers are not doubling down if they have not covered. Still, this feels like one of those scenarios where the short sellers have to be worried that the Federal Reserve might not be able to keep its dreams of hiking rates high, or at least not much even if they do raise. Another issue to consider is that two-thirds of Dow Jones Industrial Average stocks outyield the 30-year Treasury bond.
As a reminder, it takes much more conviction to be short a high-yield dividend. On top of having to pay interest to borrow the shares, short sellers are also liable for the dividend payments each quarter. This means that they are starting out with the assumption that the shares will have to drop far more than their yield might indicate.
24/7 Wall St. has looked at the current short interest report from the July 29 settlement date and compared it to the mid-July settlement date. Some color has been added versus prior dates, and we have included the dividend yield that short sellers are on the hook for, as well as a current share price versus the Thomson Reuters consensus analyst price target.
Altria Group Inc. (NYSE: MO) saw its short interest drop handily to 11,601,950 shares for the July 29 settlement date, down over 13% from the 13,364,642 shares short in mid-July. This short interest is lower by one-third versus much of 2015. Altria’s yield is now about 3.4%, after its shares are up at $66.60. Its consensus analyst price target is $69.25.
AT&T Inc. (NYSE: T) saw its short interest hardly change, with a reading of 78,630,532 shares at the end of July versus 78,576,264 shares short on the previous settlement date. This short interest is quite muted compared to 2015. AT&T’s dividend yield is just under 4.5%, now that its shares are back above $43. As a reminder, AT&T is above its consensus target price of $42.68.
Merck & Co. Inc. (NYSE: MRK) saw a decline in its short interest, down 11.5% to 28,366,643 shares at the end of July (versus 32,057,687 in mid-July). With shares at $62.49, Merck’s dividend yield is now 2.9%, and its consensus analyst target is $64.58. Just remember that the latest news pop was after that cut-off date.
Pfizer Inc. (NYSE: PFE) barely changed in its short interest, rising 0.3% to 47,812,831 at the end of July from 47,671,027 in mid-July. Pfizer’s dividend yield is 3.45%, and the $35.08 price now compares to a consensus analyst price target of $39.35.
Procter & Gamble Co. (NYSE: PG) saw a rather large drop in July’s short-selling activity. Its short interest was 19,094,144 shares on July 25, down a sharp 19.4% from the 23,687,577 shares short in mid-July. The share price of $85.99 generates a yield of 3.1%, and the consensus price target is $90.56.
Verizon Communications Inc. (NYSE: VZ) saw its short interest drop to 30,460,551 shares at the end of July, down 11% from the previous 34,241,814 shares short. The $53.66 share price compares to a consensus price target of $54.17 and generates a dividend yield of 4.2%.