Entering text into the input field will update the search result below

The Political Walls Might Be Closing In On This REIT: CoreCivic

Nov. 04, 2019 6:45 AM ETCoreCivic, Inc. (CXW)39 Comments
Arturo Neto, CFA profile picture
Arturo Neto, CFA


  • The political environment has been especially harsh on private prison owners like CXW.
  • The stock has taken a beating and by some valuation measures looks very cheap.
  • With so much political uncertainty and a dividend quality score that is deteriorating, we suggest holding off on this 11% yielder.
  • This idea was discussed in more depth with members of my private investing community, The Income Strategist. Get started today »

Photo Source

The political environment is one of the key factors that impacts the REIT industry and the policies of the existing Trump-led Republican government have led to the emergence of winners and losers amongst REITs. The prison REIT subsector is a segment that has benefitted immensely from the government’s uncompromising stance on illegal immigration and deportation. Over the last two years, a surge in illegal border crossings and arrests from raids have led the U.S. Immigration and Customs Enforcement (ICE) agency to rely heavily on private prison companies to expand capacity. The number of people detained by ICE reached a record high in FY 2018 and the agency reported a record number of apprehensions along the southwest border in May 2019.

Source: US Customs and Border Protection

The heightened enforcement and increased border arrests have benefited private prison companies such as CoreCivic (NYSE:CXW) whose 46% of revenue is derived from ICE and US Marshals Service. CXW has emerged as a popular dividend stock that has delivered 10% dividend growth per year on average over the past eight years. Despite having a high dividend yield of 10.18%, this ‘high-yield stock’ continues to give jitters to investors as it remains exposed to political uncertainties and social risks that can affect the company’s future prospects.

Business Risks

CXW’s stock has had a tumultuous trajectory in the past few years due to its severe exposure to political uncertainties. These uncertainties arise from conflicting viewpoints that the Republicans and Democrats have about the country’s prison system. CXW’s stock plunged more than 40% when the Obama administration issued an order to phase out the federal use of private prisons. Later, the stock rebounded when the Trump administration decided to rescind the order and tighten security along the southwest border.

Along with immigration policy, the question of

Generate Better Returns with my Five Income Strategies

Expand your income investing to include five unique strategies. Use them individually or combine them to generate the target returns you want.

Get access to our 5 Income Portfolios and research including

  • Stable Monthly Income Portfolio
  • Dividend Growth Portfolio
  • High Income Portfolio
  • Tax-Exempt Income Portfolio
  • Income Safety Portfolio

In addition, get investment strategies to navigate all phases of the macroeconomic cycle and advice from Arturo Neto, a Chartered Financial Analyst (CFA) and Certified Private Wealth Advisor (CPWA).

As a member, you will also get preferred pricing on Financial Planning and Portfolio Guidance services.

This article was written by

Arturo Neto, CFA profile picture
I have been involved in financial services for almost 30 years. When I first started focusing on financial planning and money management it was out of a first-hand experience watching friends and family having to work well past retirement age because they hadn't saved or invested enough. Eventually I landed in a family office worth hundreds of millions of dollars where I was able to see 'how the other half lived' so to speak. I now operate a wealth advisory firm and publish articles on Seeking Alpha for DIY investors that prefer to manage their own money. As publisher of The Income Strategist, a premium subscription service on SA, my goal is to guide investors on how best to generate income from their investments. The service includes several income portfolios with different strategies that members can use independently or in combination. As part of the service, I also collaborate with other SA authors to provide broader and deeper coverage of investing. In addition to being a Chartered Financial Analyst, I am also a Certified Private Wealth Advisor and have an MBA from the Darden Graduate School of Business at the University of Virginia. I also hold a Master of Science in Finance and Bachelors in Finance from Florida International University. Having lived in Miami almost my entire life, my family and I relocated to Nashville, Tennessee in May 2018 in the pursuit of a better lifestyle and southern hospitality. If you're ever in the area, please do reach out. I'm happy to be teaming up with the following expert analyst contributors:1. Dilantha De Silva2. The Belgian Dentist

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This article is meant to identify an idea for further research and analysis and should not be taken as a recommendation to invest. It does not provide individualized advice or recommendations for any specific reader. Also note that we may not cover all relevant risks related to the ideas presented in this article. Readers should conduct their own due diligence and carefully consider their own investment objectives, risk tolerance, time horizon, tax situation, liquidity needs, and concentration levels, or contact their advisor to determine if any ideas presented here are appropriate for their unique circumstances. Furthermore, none of the ideas presented here are necessarily related to NFG Wealth Advisors or any portfolio managed by NFG.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.