The Dynamic Dividend

The GEO Group to Initiate Dividend, Yield 2.3%

The GEO Group (GEO) today announced the adoption of a dividend policy that will have the provider of correctional, detention, and residential treatment services returning cash to shareholders later this year.

GEO expects to begin paying a quarterly dividend of $0.10 per share during the fourth quarter of 2012. Analysts currently expect the company to earn $1.66 per share this year, giving GEO a very manageable 24% payout ratio to begin its dividend-paying era. The company also has enough cash (about $0.73 per share) on its balance sheet to cover its new payout for nearly two years.

Shares of GEO are currently trading at $17.80, up about 5% on the year. Buyers at this level can expect to be sitting on a yield-on-cost of 2.25% when the company declares its first payout.

The recent crop of new dividend-payers has been blowing away the broader market over the last six months. It should be interesting to see if GEO can continue the trend.