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The GEO Group Inc. (GEO) is a real estate investment trust that invests in private prisons and mental health facilities in North America, Australia, South Africa and the United Kingdom.
The company generated about 65% of its revenue from the U.S. Secure Services, 25% from GEO Care, 9% from international services and 1.2% from Facility Construction & Design in 2019.
The U.S. Secure Service oversees the operation and management of approximately 75,000 beds in 67 secure facilities providing services on behalf of the Federal Bureau of Prisons, U.S. Immigration & Customs Enforcement and other agencies. Geo Care oversees community reentry centers, non-residential reentry programs and youth treatment facilities.
The GEO Group reported third-quarter revenue that fell by 8.3% to $579.14 million, missing consensus estimates by $1.39 million, although FFO came in at $0.67 per share, beating consensus estimates by 20 cents per share. The company also raised its FY20 AFFO guidance to $2.43-2.45 per diluted share, which was higher than the $1.77 consensus estimate.
The company experienced a continuation of favorable cost trends that resulted in better-than-expected FFO performance, but revenue continues to suffer from operational and financial challenges associated with the COVID-19 pandemic. Prison populations have fallen, and U.S. Immigration and Customs Enforcement (ICE) and U.S. Marshal Service facilities have experienced lower occupancy volumes due to the pandemic.
Over the past couple of quarters, the company has opted to cut its dividend to preserve capital and focus on paying down debt, although no debt matures until 2022.
The company most recently cut its quarterly dividend by 26.5% to $0.25 per share, which represents forward yield of over 11%. The dividend is payable on February 1, 2021 to shareholders on record as of January 25, 2021.
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