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The Geo Group Poised To Benefit From “Zero Tolerance” Policy

|About: The GEO Group, Inc. (GEO), Includes: CXW

|By: , SA News Editor

Prison operators GEO Group (GEO +0.8%) and CoreCivic (CXW +1%), both contributors to Republican campaigns, stand to profit from President Trump's "zero tolerance" policy on illegal immigration that has resulted in thousands of undocumented immigrants being held in detention centers, Bloomberg reports.

The Department of Homeland Security is looking at expanding capacity for 15,000 more people in family detention centers compared with current capacity of about 3,200.

GEO, the biggest private prison operator, has a family residential center in Karnes County, TX, while CoreCivic has a facility for families in Dilley, TX. GEO runs 11 immigrant processing centers and CoreCivic runs eight.

The two companies have made more than $2.5M in combined political donations since 2015, Bloomberg says.

According to the National Immigrant Justice Center, about 70% of immigrant detainees are held in facilities owned by private companies.”

Core Holding For A Reason

The Geo Group is a long-term core holding in our portfolio. As a private prison REIT, it pays out 90% of its earned income to shareholders in the form of dividends. REIT dividends are treated as ordinary income for tax purposes. Because of this, it is advisable that the first destination for these shares would be in tax deferred accounts like an IRA.

However, in a taxable account REITs have won new benefits in the new tax law. Starting in the 2018 tax year, 20% of REIT dividends are not taxable. So, there's that.

The stock has experienced quite a rebound, up 1% today and up 40% from its 52 week low. Even so, it is still about 13% below its 52 week high and yielding more than 7% at current pricing.

Investors seeking a high sustainable yield from a company currently in the sweet spot, with increasing demand for its services and facilities serving as a strong tailwind might consider opening an initial position or adding to their current position.

Fill-The-Gap Portfolio/ RODAT Portfolio Performance Vs. S&P 500 Index

Today, Thursday, June 29, the S&P 500 index midday is up .23%. By comparison, the FTG Portfolio that you have followed for over 3 1/2 years is ahead a very strong .80%, more than theee times the broad market's gain, or $4618 in Capital appreciation.

Our RODAT Subscriber portfolio is also ahead .80%, outperforming the broad market again, by the same three times.

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As promised, this has turned out to be another exciting week on Wall Street.

George Schneider



Disclaimer: This article is intended to provide information to interested parties. As I have no knowledge of individual investor circumstances, goals, and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any stocks mentioned or recommended.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

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Disclosure: I am/we are long ALL FILL-THE-GAP PORTFOLIO STOCKS.