The short-squeeze of GameStop (+134%) and AMC (+301) on Wednesday, made it a historical day for retail investors and hedge funds. Some traditional dividend investors are probably wondering what is going on?
Short-squeeze is driven by Reddit
The short-squeeze is mainly driven by Reddit’s WallStreetBets forum and retail investors on Robinhood’s platform. GameStop soared as day traders took on short-sellers like Melvin Capital. Short-squeezes are not new, the driving force the Reddit’s WallStreetBets forum is. Some would state that the power has shifted more to the retail investors.
Even large caps can take a hit, as we saw in 2008 with Volkswagen. A short squeeze temporarily drove the shares of Volkswagen on the Xetra DAX from €210.85 to over €1000 in less than two days. At that moment is was briefly the most valuable company in the world.
The WallStreetBets forum is mainly focused on stocks with a high short ratio. On Yahoo finance, this ratio can be found statistics page, see for example CLX.
Short ratio’s Dividend Aristocrats
For some rest assurance, we looked at the short ratios and the percentage held by Institutions for each Dividend Aristocrat. The average short ratio is 2% and the average percentage held by Institutions above 75%.
The table below lists all dividend aristocrats and the two percentages mentioned, sorted by short ratio.
In the end, long-term investing is sticking to your plan and about the fundamental valuations of a company. The duration of the short squeeze in Volkswagen lasted only a few days.
Other Sources of Dividend Investment Ideas
There are several lists to quickly screen for businesses that regularly pay rising dividends.
- The Dividend Aristocrats Index is based on 64 companies part of the S&P 500 and with 25+ years of consecutive dividend increases.
- The Dividend Kings List is even more exclusive than the Dividend Aristocrats. It is comprised of less than 20 businesses with 50+ years of consecutive dividend increases.
- The MoneyInvestExpert Defensive Aristocrats is a performance-based top-10 selection of the Dividend Aristocrats to outperform the market in the long-term.
- Portfolio lists like the Berkshire Hathaway Portfolio or Bill Gates’stock portfolio can be a source.
- For the European focused investors, there is also the list of European Dividend Aristocrats.
- Dividend Champions are not necessarily members of the S&P 500 index, have increased their dividend for 25 or more consecutive years.
- 100+ years of dividend, the list of stocks that pay over 100 years of dividend can be a list of inspiration.
- Blue Chips stocks from the US or the European ones.
Next to selecting the right dividend stocks, important principles for successful long-term investing are Disciple, Diversification, Defensive & indeed Dividend. Read more about this in our free e-book.
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