In this article, we will discuss dividend giants with the lowest short interest.
Short sellers have faced significant challenges over the past few years, as the market’s ongoing rally has not been favorable to them, with 2023 being no exception. According to S3 Partners Research, investors betting against US and Canadian stocks incurred paper losses totaling $194.9 billion last year due to a sharp market rally. The report highlighted that 2023 was a particularly tough year for short sellers, with tech stocks soaring 43.4% and the broader market rising 24.2%. Despite the difficulties, some investors managed to profit from short positions, particularly during the banking crisis in March last year.
Short selling is a common and regulated investment strategy that investors use when they believe a stock is overpriced based on their research. It enhances market liquidity, contributes to market stability, and helps both investors and companies manage risk in their portfolios.
Short selling isn’t just used for excitement; it plays a key role in improving price accuracy, ensuring more efficient capital allocation, preventing financial bubbles, and revealing fraud. According to a report by the Washington-based Managed Funds Association, short selling signaled that the US housing market was overvalued in 2008, helping to limit the broader impact of the financial crisis. The report also mentioned that over the past two decades, short selling has exposed numerous corporate frauds, including cases like Enron, Tyco, Worldcom, MBIA, Insys Therapeutics, Valeant, and Wirecard, among others.
In August, short sellers focused their attention on airlines due to increasing concerns about the sector, which has been experiencing declines in earnings and rising costs, according to a report from data and technology firm Hazeltree. Some investors and analysts believe that the airline industry, which is cyclical and closely linked to macroeconomic conditions, may be heading for another downturn as travel demand normalizes after COVID-19 and consumers become more sensitive to pricing. The Hazeltree report also noted that traders made bets against banks during the same month.
Short sellers have clearly identified opportunities in neglected or struggling segments of the market. Last year, the instability among regional banks drew the attention of short sellers, who examined these lenders’ balance sheets for weaknesses related to rising interest rates and took positions against their stocks. In 2023, while the overall market was on an upward trend, this sector proved to be particularly lucrative for these traders. The volatility experienced by regional bank stocks earlier this year once again led to significant paper profits for short sellers, mirroring the gains achieved during last year’s disruptions in the sector. As a result, analysts are reassessing their view of short sellers. Carson Block, founder of Muddy Waters Research, believes that markets are increasingly reliant on short sellers. However, he pointed out that ongoing stock rallies and emerging regulatory hurdles are posing challenges for bearish investors, making it harder for them to secure capital. With this, we will take a look at some dividend giants with the lowest short interest.
Image by Alexsander-777 from Pixabay
Our Methodology:
To create this list, we used the Finviz stock screener to find dividend stocks with a market capitalization of at least $10 billion and dividend yields exceeding 3% as of September 22. We then narrowed down the selection to stocks with less than 3% of their float sold short, using data from Yahoo Finance recorded on September 22. The stocks are arranged in descending order based on their short interest rates.
We also measured hedge fund sentiment around each stock according to Insider Monkey’s database of 912 funds as of Q2 2024. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
8. Ally Financial Inc. (NYSE:ALLY)
Short % of Float as of September 22: 2.97%
Ally Financial Inc. (NYSE:ALLY) is a Michigan-based bank holding company. The company provides services related to banking, investing, home loans, and auto finance. At a recent Barclays conference, CFO Russ Hutchinson mentioned that the company is facing increasing “credit challenges,” with auto delinquencies rising in July and August. He noted that charge-off rates were higher than anticipated and indicated that delinquencies could continue to grow due to ongoing inflationary pressures on customers. However, he stated that credit card rates are meeting expectations. The stock is down by nearly 4% since the start of 2024.
The investment appeal of Ally Financial Inc. (NYSE:ALLY) stems from its digital-first approach, which helps reduce overhead costs compared to traditional banks. Its significant position in auto lending and growing deposit base provide a strong foundation for future growth. However, an economic downturn could impact loan performance, particularly in the auto sector. As a result, this stock may not be ideal for short-term traders looking for quick profits but is likely to attract value investors willing to hold through various business cycles.
Ally Financial Inc. (NYSE:ALLY)’s business model highlights the future direction of banking, especially with the increasing role of AI technology. The absence of physical branches could become an asset, particularly in attracting new deposits. By the second quarter of 2024, the bank had grown its deposit customer base to 3.2 million, up from 1.2 million in 2016, with an impressive 96% retention rate. In addition, it reported $13 billion in deposit balances from investing customers. Ally’s fully digital approach has proven its value beyond just offering competitive rates, as shown by 61 consecutive quarters of deposit customer growth and over one million actively engaged savings customers.
Ally Financial Inc. (NYSE:ALLY) pays a quarterly dividend of $0.30 per share and has a dividend yield of 3.53%, as of September 22. It is one of the best dividend giants on our list as the company has been making uninterrupted dividend payments to shareholders since 2016.
At the end of Q2 2024, 45 hedge funds tracked by Insider Monkey held stakes in Ally Financial Inc. (NYSE:ALLY), down from 47 in the previous quarter. These stakes are collectively valued at over $2.36 billion. Warren Buffett’s Berkshire Hathaway was the company’s leading stakeholder in Q2.
7. Archer-Daniels-Midland Company (NYSE:ADM)
Short % of Float as of September 22: 2.20%
Archer-Daniels-Midland Company (NYSE:ADM) is an Illinois-based food company that specializes in food processing and commodities trading. The company delivered strong results during the second quarter of 2024, despite difficult market conditions, and the company expressed satisfaction with the progress made toward its 2024 priorities and strategic initiatives. However, as a processor and trader of grain, the company is influenced by commodity prices. An increase in supply has caused prices to drop, which has had a negative effect on its performance.
Analysts are also reconsidering their outlook on Archer-Daniels-Midland Company (NYSE:ADM). Here is what Diamond Hill Capital highlighted about the company in its Q2 2024 investor letter:
“We exited three positions in Q2, including Generac Holdings, NXP Semiconductors and Archer-Daniels-Midland Company (NYSE:ADM). Agricultural commodities and products company Archer-Daniels-Midland recently announced a nutrition-segment accounting issue — while it didn’t require a restatement of consolidated financials, we think it may be the proverbial canary in the coal mine. As we consequently lost our confidence in the management team, we exited our position.”
In Q2 2024, Archer-Daniels-Midland Company (NYSE:ADM) reported revenue of $22.2 billion, which fell by 12% from the same period last year. The revenue also beat analysts’ estimates by $908.2 million. The stock is down by over 16% since the start of 2024. That said, the company remains confident in its future earnings outlook. For the second half of the year, improvements in both the crush and ethanol segments, along with a focus on operational excellence, and key priorities reinforce confidence in meeting full-year expectations, despite external uncertainties.
Archer-Daniels-Midland Company (NYSE:ADM), one of the best dividend giants, currently offers a quarterly dividend of $0.50 per share. In January this year, the company achieved its 51st consecutive year of dividend growth. The stock supports a dividend yield of 3.28%, as of September 22.
Insider Monkey’s database of Q2 2024 indicated that 35 hedge funds owned stakes in Archer-Daniels-Midland Company (NYSE:ADM), compared with 40 in the previous quarter. These stakes have a consolidated value of nearly $732 million. Among these hedge funds, AQR Capital Management was the company’s leading stakeholder in Q2.
6. Dow Inc. (NYSE:DOW)
Short % of Float as of September 22: 1.83%
Dow Inc. (NYSE:DOW) is an American chemicals company that mainly operates in the material science industry. The company is involved in the manufacturing and marketing of a wide range of chemical, plastic, and agricultural products.
In the second quarter of 2024, Dow Inc. (NYSE:DOW) reported revenue of $11 billion, which fell by 4.4% from the same period last year. Its volumes grew by 1% on a YoY basis but a sluggish global economy has led to lower prices. The global macroeconomic recovery has been progressing at a slower pace than anticipated. The company continues to focus on managing working capital, cutting costs, and aligning its operating rates with current demand. Moreover, its commitment to innovation with customers was evident during the quarter, as the company successfully tapped into increasing demand in sectors like packaging, electronics, and home and personal care.
Dow Inc. (NYSE:DOW)’s cash position makes it one of the most reliable options among income investors. In the most recent quarter, the company generated $832 million in operating cash flow and its free cash flow came in at $109 million. During the quarter, it returned $691 million to shareholders through dividends and share repurchases. Its strong cash generation has allowed the company to pay uninterrupted dividends to shareholders since 1912. Currently, it pays a quarterly dividend of $0.70 per share and has a dividend yield of 5.38%, as of September 22. With 1.83% of its float sold short, DOW is one of the best dividend giants on our list.
As of the close of Q2 2024, 32 hedge funds tracked by Insider Monkey owned stakes in Dow Inc. (NYSE:DOW), compared with 35 in the previous quarter. These stakes are valued at over $1.2 billion. With 18.8 million shares, Pzena Investment Management was the company’s leading stakeholder in Q2.
5. Amcor plc (NYSE:AMCR)
Short % of Float as of September 22: 1.61%
Amcor plc (NYSE:AMCR) is a global multinational packaging company that offers a wide range of related products for different industries. The company has demonstrated global resilience throughout its history. Founded in the 1860s as Australian Paper Manufacturers, it has evolved significantly over the years. In 2000, the company shifted its focus by selling off its paper goods business. Since then, Amcor has grown through a series of strategic acquisitions, including the $7 billion acquisition of Bemis in 2019, which helped establish its leadership in the global packaging industry.
Amcor plc (NYSE:AMCR) ended fiscal 2024 on a strong note, with its core business showing continued sequential improvement in both volume and earnings growth. Fourth-quarter adjusted EPS rose by 9%, surpassing the company’s April expectations. Volumes saw year-over-year growth as customer demand strengthened, while the team remained focused on cost management, leading to significant margin expansion. In addition, annual adjusted free cash flow was at the high end of the projected range, increasing by 12% compared to the previous year. In fiscal Q4 2024, the company reported revenue of $3.54 billion, which fell slightly by 3.7% from the same period last year.
Amcor plc (NYSE:AMCR) is a strong dividend payer as the company has remained committed to its shareholder obligation over the years. In FY24, it returned $750 million to investors through dividends and share repurchases. The company’s ability to make dividend payments was supported by its robust free cash flow, which amounted to $952 million, up 12% from last year. It currently offers a quarterly dividend of $0.125 per share and has a dividend yield of 4.51%, as of September 22. It is one of the best dividend giants as the company maintains a 40-year streak of consistent dividend growth.
The number of hedge funds tracked by Insider Monkey holding stakes in Amcor plc (NYSE:AMCR) grew to 21 in Q2 2024, from 17 in the previous quarter. These stakes have a total value of over $115 million.
4. American Electric Power Company, Inc. (NASDAQ:AEP)
Short % of Float as of September 22: 1.47%
American Electric Power Company, Inc. (NASDAQ:AEP) ranks fourth on our list of the best dividend giants with the lowest short interest. The American domestic electric utility company offers a wide range of energy services to its consumers. In the second quarter of 2024, the company reported revenue of $4.6 billion, reflecting a 2.7% increase compared to the same period the previous year. Its continued investments in a modern, cost-effective, and reliable energy infrastructure have benefited both its customers and communities, while also supporting its earnings. A strong performance during the first half of the year, along with effective management, has allowed AEP to maintain its 2024 earnings guidance.
American Electric Power Company, Inc. (NASDAQ:AEP) is seeing remarkable growth in sections of its service region, supported by a robust transmission system and a focus on economic development. In Q2 2024, commercial load rose by 12.4% year-over-year, mainly fueled by a 20%+ increase at its Transmission & Distribution companies as new data processing centers came online. Additionally, the company has secured customer commitments for more than 15 gigawatts of additional load by the end of the decade.
American Electric Power Company, Inc. (NASDAQ:AEP) holds a history of raising its dividends for 14 consecutive years, which makes it a reliable investment option for income investors. Its quarterly dividend currently sits at $0.88 per share for a dividend yield of 3.43%, as of September 22.
American Electric Power Company, Inc. (NASDAQ:AEP) was a part of 35 hedge fund portfolios at the end of Q2 2024, up from 28 in the previous quarter, as per Insider Monkey’s database. The stakes owned by these hedge funds have a total value of $1.6 billion. GQG Partners owned the largest stake in the company in Q2.
3. Comcast Corporation (NASDAQ:CMCSA)
Short % of Float as of September 22: 1.35%
Comcast Corporation (NASDAQ:CMCSA) is an American telecommunications and media conglomerate that offers related products and services to its consumers. The stock is down by nearly 7% since the start of 2024 because the company wasn’t able to impress investors and analysts with its earnings in the second quarter of 2024. It faced difficulties in its Studios and Theme Parks division, with declines of 27% and 10.6%, respectively, compared to the same period last year. Overall, the company’s quarterly revenue totaled $29.6 billion, reflecting a 3% year-over-year decrease.
Despite facing challenges, several segments of Comcast Corporation (NASDAQ:CMCSA) showed growth. The media division returned to Adjusted EBITDA growth, driven primarily by Peacock, its streaming service, which recorded its best year-over-year performance since launching in 2020. Peacock was a standout in Comcast’s second-quarter results, with a 38% increase in streaming subscribers, reaching 33 million, while quarterly losses narrowed to $348 million from $651 million in Q2 2023.
Comcast Corporation (NASDAQ:CMCSA) also delivered strong cash generation during the quarter, a positive sign for income-focused investors. The company reported $4.7 billion in operating cash flow and $1.3 billion in free cash flow. It remained committed to shareholder returns, distributing $3.4 billion through dividends and share buybacks.
On July 23, Comcast Corporation (NASDAQ:CMCSA) declared a quarterly dividend of $0.31 per share, which fell in line with its previous dividend. The company’s dividend growth streak spans over 16 years. The stock has a dividend yield of 3.04%, as recorded on September 22. With 1.35% of its float sold short, CMCSA is one of the best dividend giants on our list with the lowest short interest.
According to Insider Monkey’s database of Q2 2024, 61 hedge funds owned stakes in Comcast Corporation (NASDAQ:CMCSA), down from 63 in the preceding quarter. These stakes are collectively valued at over $3.66 billion.
2. Bristol-Myers Squibb Company (NYSE:BMY)
Short % of Float as of September 22: 1.10%
Bristol-Myers Squibb Company (NYSE:BMY) is an American pharmaceutical company that specializes in innovative medicines and therapies for patients with serious illnesses. The company has a strong dividend history, having raised its payouts for 18 consecutive years. The company’s strong cash flow has enabled it to steadily increase its dividends for nearly two decades. Its trailing twelve-month operating cash flow is $14.1 billion and its levered free cash flow for the period is $15.7 billion. Currently, it pays a quarterly dividend of $0.60 per share and has a dividend yield of 4.74%, as of September 22.
Earlier this year, Bristol-Myers Squibb Company (NYSE:BMY) completed a $14 billion acquisition of Karuna Therapeutics and its experimental psychosis treatment, KarXT. However, the stock dropped after the company took a $12.9 billion charge for in-process research and development in the first quarter related to the acquisition. Since the start of 2024, the stock is down by a little over 4%, as of the close of September 22.
Despite this, Bristol-Myers Squibb Company (NYSE:BMY) still shows significant growth potential. In Q2 2024, the company reported $12.2 billion in revenue, a 9% increase from the same period last year. Its Growth and Legacy portfolios drove a 13% year-over-year increase in U.S. revenue to $8.8 billion. The company’s development pipeline includes five experimental drugs in late-stage clinical trials. With numerous growth drivers in place and several products already commercialized, BMY is well-positioned to sustain steady cash flow.
Of the 912 hedge funds tracked by Insider Monkey at the end of Q2 2024, 61 funds owned stakes in Bristol-Myers Squibb Company (NYSE:BMY), up from 57 in the previous quarter. These stakes are worth over $2.5 billion in total. With over 14 million shares, Pzena Investment Management was the company’s leading stakeholder in Q2.
1. Energy Transfer LP (NYSE:ET)
Short % of Float as of September 22: 0.81%
Energy Transfer LP (NYSE:ET) tops our list of the best dividend giants with the lowest short interest. The Texas-based energy company is engaged in the pipeline transportation and storage for natural gas, crude oil, and other refined products. New growth initiatives and acquisitions have been crucial in increasing volumes across the company assets. In July 2024, it completed its acquisition of WTG Midstream Holdings LLC, adding approximately 6,000 miles of gas-gathering pipelines to strengthen its presence in the Midland Basin. The acquisition also included eight gas processing plants with a total capacity of 1.3 Bcf/d, along with two more plants under construction. Since the deal closed, one of these 200 MMcf/d plants has already started operations. In addition, Energy Transfer LP and Sunoco LP formed a joint venture, combining their crude oil and producing water-gathering assets in the Permian Basin.
This year, Energy Transfer LP (NYSE:ET) expects to invest between $3 billion and $3.2 billion in growth capital expenditures (capex) for new projects. Looking ahead, allocating $2.5 billion to $3.5 billion annually in growth capex would enable the company to cover its distribution while still having funds from its cash flow to reduce debt or repurchase shares.
Energy Transfer LP (NYSE:ET) reported solid cash flow in the second quarter of 2024, a positive sign for income investors. The company’s distributable cash flow (DCF) reached $2.04 billion, up from $1.55 billion in the same period last year. On July 26, it raised its quarterly dividend by 0.8% to $0.32 per share, marking its 11th consecutive quarterly dividend increase.
At the end of June 2024, 32 hedge funds owned stakes in Energy Transfer LP (NYSE:ET), the same as in the previous quarter, according to Insider Monkey’s database. These stakes are collectively valued at over $911 million.
Overall, Energy Transfer LP (NYSE:ET) ranks first on our list. While we acknowledge the potential for ET to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ET but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
