Could GEO Group (NYSE: GEO) Cut its Dividend?
Today is Wednesday, October 16, 2019, and this is your daily dividend safety update. Today we’re looking at GEO Group (NYSE: GEO) stock to see whether its 12.24% dividend is safe.
High-yield dividend stocks can be very useful to investors of all ages. Younger investors can use dividend reinvestment plans (DRIPs) to grow their portfolios exponentially over time, while retirees can use them to generate passive income.
In both cases, it’s preferable to buy dividend stocks with steady or rising dividends – and avoid those that cut their dividends.
Let’s look at the payout ratio, cash flow growth, and dividend history of GEO Group to gauge the probability of a dividend cut in the next few years.
Payout Ratio (Dividends/Earnings)
GEO Group has a payout ratio of 148.5%. That’s too high for our liking. Payout ratio equals dividends per share divided by earnings per share. Payout ratios near or over 100% indicate that the company might not be able to afford its dividend — or that it might have to borrow money to pay it.
Cash Flow Growth Year-Over-Year
GEO Group has grown its cash flow by 63.04% in the last year. That’s a good omen for dividend investors! When a company grows its cash flow, it can use some of that extra cash to strengthen — or even raise — its dividend.
Dividend History & Recent Cuts
GEO Group has not cut its dividend in the recent past. That’s a good sign. It’s not a guarantee that the company will never cut its dividend, but companies that have cut their dividends recently are generally more likely to cut them again.
GEO Group stock has failed 1 of our 3 dividend safety metrics. With that in mind, we believe a dividend cut is possible in the next few years.
Editor’s Note: We’ve been keeping an eye on some dividend stocks that could be better for your income portfolio than GEO Group. These dividends are much bigger — and safer — than the paltry yields many investors settle for. Enter your email below to learn more.
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