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. Related: 5 Silver Mining Stocks Poised to Rebound Naturally, these plays aren't without their blemishes; there's a reason that these stocks are being heavily shorted. The biggest risk, by far, for any dividend stock is the chance that poor fundamentals will force management to cut payouts -- and small shares. But for investors looking for exposure to a speculative play with a beefier risk/reward tradeoff, these could be powerful upside plays for the coming year. With that, here's a look at heavily shorted dividend stocks that could get squeezed higher. |
