1. The GEO Group, Inc. (NYSE: GEO)
Dividend Yield: 17.50%
Value: $121,000
Percent of Paul Tudor Jones’ 13F Portfolio: 0.0034%
No. of hedge Fund Holders: 18
The GEO Group, Inc. (NYSE: GEO) offers a public repository for genomics data which supports the submission of MIAME-compliant data. The company’s capital structure has heavily relied on debt in the past, which means that it boosts its valuation each time it slashes its debt profile.
GEO’s board announced that the company would forego dividend payouts to divert more capital towards deleveraging. The move might seem unfavorable to investors, but it is a strategic move that could facilitate more substantial dividend payouts in the future. The company might issue an additional dividend payment to meet the minimum REIT distribution requirements.
The company plans to clear between $125 million and $150 million worth of debt this year. The company recently revealed 6.50% exchangeable senior unsecured notes worth $200 million, which will expire in 2026.
The GEO Group, Inc. (NYSE: GEO) reported a better-than-expected performance in Q4 2020. Its FFO per share during the quarter was 48 cents which outperformed the 45 cents estimate. However, it was still an underperformance considering that its FFO per share in Q4 of the previous year was 53 cents per share. Its Q4 2020 revenue was $578.1 million, which was higher than the $576.0 million average estimate provided by two analysts.
Miller Value Partners, in their Q4 2020 Investor Letter, mentioned that The GEO Group, Inc. (NYSE: GEO) was their top detractor in their fourth quarter 2020 results. Here is what Miller Value Partners has to say about The GEO Group, Inc. in their letter:
“GEO Group (GEO) was the top detractor over the quarter, falling 19.4%. The company reported Q3 revenue of $579.1M (-1% Quarter-over-Quarter (Q/Q)), net operating income of $151.4M (+2% Q/Q), and Earnings Before Income, Taxes, Depreciation, Amortization, and Restructuring (EBITDAR) of $112.1M (-1% Q/Q). Adjusted funds from operations (AFFO) of $0.67 drove 2.0x coverage on the quarterly dividend of $0.34/share (15.4% annualized yield). GEO exited the quarter with cash of $54M and net debt of $2.6Bn, which on TTM EBITDAR of $448.8M implies net leverage of 5.8x. Management lifted Fiscal Year (FY) 20 guidance across the board, including revenue +0.3% to $4.347Bn, Net Operating Income (NOI) +3% to $609M, EBITDAR +4.4% to $429M, and AFFO +5.6% to $2.44/share (28% FCF yield). Additionally, GEO maintained guidance for $100M of debt paydown in 2020 and a minimum of $50M each year moving forward, which coupled with savings from the previously announced reduced dividend will be applied towards debt reduction.”
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