BALTIMORE (Stockpickr) -- This week's short-squeeze opportunities could pay dividends. Literally.
Typically, short bets are predicated on a company's inability to generate positive returns for shareholders. As share prices fall, short-sellers profit. But dividend-payers change the game a bit since the market-neutral returns these companies generate through income payouts is based solely on business fundamentals, and not on market conditions or sentiment. That's why even the most unloved high-yielding dividend stocks can be attractive short squeeze opportunities right now.
In case you're not familiar, a short squeeze is the buying frenzy that ensues when a heavily shorted stock starts to look attractive again to investors, causing share price to skyrocket. One of the best indicators of just how high a short-squeezed stock could go is the short interest ratio, which estimates the number of days it would take for short-sellers to cover their positions. The higher the short ratio, the higher the potential profits when the shorts get squeezed.
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