We recently published a list of the 25 Cheap Dividend Stocks Being Targeted by Short Sellers. In this article, we are going to take a look at where Sirius XM Holdings Inc. (NASDAQ:SIRI) stands against other cheap dividend stocks.
Short sellers — investors who profit from falling stock prices —are seeing a surge in success in 2025. They gained $159 billion in paper profits over just six trading sessions as escalating trade tensions triggered a drop of more than 10% in the US stock market. The sharp market decline, the steepest since 2022, followed President Donald Trump’s announcement of broad global tariffs. According to S3 Partners LLC, the most lucrative short position during this period was against the SPY ETF, which tracks the S&P Index. Traders betting against this fund have racked up over $6.1 billion in paper gains so far this month, based on an April 8 report from S3.
Short sellers could profit from the sharp intraday market swings that wiped out trillions in value, though their actual gains will depend on when they close their positions. S3 data showed that another $46 billion in new short bets were added in April, raising the risk that these bearish positions could intensify the market’s next major move, particularly if the current downturn reverses and pushes major indexes higher. Ihor Dusaniwsky, managing director of predictive analytics at S3, made the following comment:
“Overall, the short side was an extraordinarily profitable trade up and down the market during this correction. 81% of every short trade was profitable and 97% of every dollar shorted was a profitable trade.”
Another report from S&P Dow Jones Indices noted that the average short interest in US stocks rose to 87 basis points over the past month. The biggest jumps were observed in the Automobiles sector, which climbed by 11 basis points, followed by a 10 basis-point increase in the Commercial and Professional Services sector, and a 9 basis-point rise in the Food and Beverage sector.
Although dividend-paying stocks are generally considered more stable than growth stocks, they have still been subject to short selling throughout history. In their 1998 study Who Trades Around the Ex-Dividend Day?, Jennifer Lynch Koski and John T. Scruggs found unusual trading patterns leading up to the ex-dividend date. They suggested that security dealers might short a stock while it still includes the dividend and then repurchase it after the ex-dividend date if they expect the stock’s price drop to be larger than the dividend amount.
Similarly, in their research paper Tax-Induced Trading Around Ex-Dividend Days, Josef Lakonishok and Theo Vermaelen observed unusual levels of short selling on and shortly after the ex-dividend date. They found that this activity tends to be more pronounced in stocks offering higher dividend yields. Their findings suggest that short sellers aim to minimize the typical price drop that often follows the ex-dividend date.
A close-up of a hand, counting the money from the subscription fees of the Entertainment Communication Services company.
Our Methodology
For this article, we screened for dividend stocks with more than 3% of their float sold short, using data from Yahoo Finance recorded on April 15. From that group, we picked stocks with dividend yields above 3%, as of April 28. Companies offering high dividend yields are often more likely to attract the attention of short sellers. The stocks are ranked in ascending order of their short % of float.
At Insider Monkey, we are obsessed with hedge funds. 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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Sirius XM Holdings Inc. (NASDAQ:SIRI)
Short % of Float as of April 15: 13.59%
Dividend Yield as of April 28: 5.00%
Sirius XM Holdings Inc. (NASDAQ:SIRI) ranks seventh on our list of the dividend stocks targeted by short sellers. The American multinational broadcasting corporation is a leading provider of satellite radio and online audio entertainment services. Satellite radio initially transformed the driving experience by offering nationwide, ad-free content and exclusive deals with automakers, making it a valuable add-on for car sales. However, rising royalty costs and the rapid rise of smartphone streaming apps began to undermine its growth. These pressures, combined with the need for scale, led regulators to approve a rare monopoly when Sirius and XM merged during the financial crisis. Though it took time and financial support to finalize, the merger eventually produced a profitable, though slower-growing, business.
In the past 12 months, Sirius XM Holdings Inc. (NASDAQ:SIRI) has declined by over 31%. In the fourth quarter of 2024, the company reported revenue of $2.2 billion, down 3% from the same period last year. However, the revenue surpassed analysts’ estimates by $17.98 million. For the year, the number of self-pay subscribers dropped by 296,000.
In 2024, Sirius XM Holdings Inc. (NASDAQ:SIRI) produced $1.015 billion in free cash flow, which was about $167 million lower than the amount reported the previous year. Over time, the company has relied on its strong cash flow to buy back shares and increase returns to shareholders, while taking a more cautious approach toward adding new debt. It has raised its payouts for seven consecutive years and currently offers a quarterly dividend of $0.27 per share. As of April 28, the stock has a dividend yield of 5%.
Overall, SIRI ranks 7th on our list of the dividend stocks targeted by short sellers. While we acknowledge the potential of SIRI as an investment, our conviction lies in the belief that some deeply undervalued dividend stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued dividend stock that is more promising than SIRI but that trades at 10 times its earnings and grows its earnings at double digit rates annually, check out our report about the dirt cheap dividend stock.
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Disclosure: None. This article is originally published at Insider Monkey.