Kohl’s Corporation ($KSS) is in the spotlight lately, and not for the best reasons. The company has seen a huge spike in short interest, jumping from 41.5 million shares to 50.75 million, a staggering 22% increase. With the stock hanging around the $14 mark and a dividend yield of around 14%, there’s a lot to unpack here.

Dive into the Numbers

What’s the deal with this sudden uptick in short interest? Well, it’s not your average increase. Right now, 46.3% of Kohl’s outstanding shares are sold short. That’s a big chunk, and it suggests that many investors are betting against the company. This level of short interest can lead to wild price swings and set the stage for a potential short squeeze. You know, where short sellers have to scramble to buy back shares, pushing the stock price up.

Financial Fortitude or Fragile Foundation?

Now, let’s talk finances. On the surface, Kohl’s doesn’t seem to be in terrible shape. They’ve been paying down debt and generating some free cash flow. Plus, they’ve got a treasure trove of real estate assets that the market hasn’t fully appreciated yet. This could provide a safety net when things get rocky.

But here’s the kicker: the 14% dividend yield? It might not hold up. The yield looks juicy now, but if things go south, can they keep paying it? Investors should keep a close eye on earnings and cash flow to see if those dividends keep flowing.

The Ghost of Buyouts Past

Remember two years ago when Kohl’s rejected buyout offers around $60 per share? Those offers were all about cashing in on their real estate. Fast forward to today, and you have to wonder: would they take those offers now? If their financial performance keeps slipping, a buyout could become less of a pipe dream and more of a lifeline.

Market Mood and the Squeeze Factor

The sheer volume of short interest in Kohl’s paints a picture of a market that’s not optimistic about the company’s future. But that also means we’re ripe for a short squeeze. If some good news or a solid earnings report comes out, those short sellers may have to cover their positions, causing the stock to shoot up.

The Bottom Line

The rise in short interest at Kohl’s lays bare the challenges and opportunities it faces. Sure, the high dividend yield and real estate holdings offer some cushion, but whether the dividend is sustainable and the potential for a short squeeze are the big takeaways. Investors should stay alert to the latest happenings and weigh the risks and rewards of getting in on Kohl’s action.

The author does not own or have any interest in the securities discussed in the article.