Dividend stocks are everywhere, but many just downright stink. In some cases, the business model is in serious jeopardy, or the dividend itself isn't sustainable. In others, the dividend is so low, it's not even worth the paper your dividend check is printed on. A solid dividend strikes the right balance of growth, value, and sustainability.

Today, and one day each week for the rest of the year, we're going to look at one dividend-paying company that you can put in your portfolio for the long term without too much concern. This isn't to say that these stocks don't share the same macro risks that other companies have, but they are a step above your common grade of dividend stock. Check out last week's selection.

This week, we'll turn our attention to one of life's necessities, prison operators, and see why The GEO Group (NYSE:GEO) could be the perfect fit for income seekers.

The dreaded "S" word
The knock against prison operators such as GEO Group and Corrections Corp. of America (NYSE:CXW), or really any company that relies on government contracts to drive top-line growth, is that government spending is proving to be very unpredictable with the sequester kicking in. To reduce a federal deficit that ballooned in recent years, fail-safes were built that require the government to reduce $85 billion out of its budget between March 1 and Oct. 1. These budget cuts are expected to hit most defense contractors, but they're also affecting companies from a variety of sectors outside defense.

In April, network application delivery technology provider F5 Networks (NASDAQ:FFIV) was hammered after forecasting results that were far below Wall Street's expectations. In addition to big businesses, F5 receives about 5% of its revenue from government orders, and it squarely pointed its finger at sequestration as one of the reasons for its revenue shortfall.

Even Delta Air Lines (NYSE:DAL) in the airline sector has pointed its finger at the sequester for weakening its top- and bottom-line results. Delta, also in April, began to note that last-minute bookings, which often carry some of the best margins, were beginning to slow down. Government employees are responsible for a big enough chunk of these last-minute bookings that Delta and much of the airline industry is beginning to feel the pinch.


Alcatraz, Source: Marine_Perez, Wikimedia Commons.

The GEO Group advantage
The obvious benefit that corrections facility contractors have that companies such as F5 or Delta Air Lines don't possess is that incarceration is a basic necessity. There will always be criminals, making the need for prisons a practical necessity.

Where GEO Group really stands out is in its geographic diversity as compared with Corrections Corp. of America, also known as CCA. CCA is certainly larger than GEO Group in the U.S., with some 92,000 beds in operation and 68 total managed facilities. However, CCA doesn't operate outside the confines of the U.S., while GEO Group does. GEO contracts out with the U.K., Australian, and South African governments to operate prison facilities, giving it an escape from the constricting spending of the U.S. government.

In GEO Group's most recent quarter, it delivered revenue of $381.7 million, which was 3% higher than the year-ago period, as net operating income rose to $0.48 from $0.34. By comparison, CCA saw revenue fall 2% to $434 million despite locking in new contracts. That's the difference between relying solely on U.S. contracting revenue and having geographic diversity. 

Show me the money, GEO Group
In addition to growing its top and bottom line, GEO Group followed in the footsteps of the larger CCA by completing its conversion to a real estate investment trust earlier this year. The advantage of a corporation in becoming a REIT is considerably lower taxation while shareholders benefit, because a REIT is required to pay out 90% or more of its income in the form of a dividend. The end result for shareholders has been a big bump in GEO's payout:

Source: Nasdaq.com.
*Assumes mid-point of $0.53-$0.55 dividend guidance issued by GEO Group in the most recent quarterly report.

Although this is just six quarters of payment history, we've seen GEO's dividend jump from just $0.20 to an expectation in the upcoming quarter that GEO will pay out 75% of its funds from operations, or $0.53-$0.55 per share, as a dividend. GEO is currently yielding 6.1% annually based on a payout of $0.50 per quarter and could see its projected yield jump to 6.8% if it paid out $0.54 (the midpoint of its fourth-quarter payout guidance) for the next four quarters.

Foolish roundup
It's understandable that GEO Group may not be a choice for socially responsible investors, but it nonetheless represents a basic necessity of life and, as such, will deliver relatively stable cash flow. With geographic advantages over CCA and its conversion to a REIT now complete, GEO Group looks poised to deliver a 5% or greater yield to investors for years to come.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of, and recommends, F5 Networks. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.