Medtronic (MDT) reported earnings on Thursday. The medical device company faced a very challenging operating environment but announced plans to increase its dividend by 7%, marking its 43rd consecutive year of payout raises. As expected, the coronavirus crisis caused significant disruption for Medtronic's customers (hospitals, surgical centers, other care facilities). Procedure volumes plunged as health care systems diverted their resources to fighting COVID-19, governments implemented restrictions on elective procedures, and people avoided seeking treatment even for emergency conditions. For the quarter ending April 24, Medtronic's organic revenue fell 25%. COVID-19 reduced sales in China for the entire quarter but only picked up around six weeks of virus-related revenue weakness for the rest of the world. As a result, management expects the current [...]

CoreCivic (CXW) is one of the largest private prison operators in America. The REIT generates 85% of its net operating income (NOI) from managing 50 correctional and detention facilities. CoreCivic also leases properties to government agencies (10% of NOI) and operates residential reentry facilities (5%). Though somewhat controversial, managing prisons has historically been a predictable business. CoreCivic provides an essential service and enjoys contractual cash flow paid by the government, resulting in minimal credit risk and an average contract renewal rate of 94% over the last five years. However, the COVID-19 crisis is pressuring the U.S. private prison industry in several ways. First, occupancy is falling. CoreCivic's prison population fell 3% in April, driving a similar decline in management revenues.

GEO Group (GEO) and CoreCivic (CXW) operate over 80% of America's privately managed prison facilities. GEO derives about 64% of its revenue from managing correctional and detention facilities for federal and state government agencies. Another 25% of the business is from operating community reentry centers and youth treatment facilities, with the remaining 11% from providing correctional services in international markets. Though somewhat controversial, managing prisons has historically been a predictable business. GEO provides an essential service and enjoys contractual cash flow paid by the government, resulting in minimal credit risk and high contract renewal rates. However, as we discussed in our recent note on CoreCivic, the COVID-19 pandemic is pressuring the U.S. private prison industry in several ways.

In March, we discussed the pandemic-related challenges facing V.F. Corp (VFC) and the uncertainty they created for the global apparel company's dividend.  V.F. Corp reported earnings on May 15 and reassured its shareholders that the dividend remains a priority, even though free cash flow is no longer expected to cover the payout this year.   We do, however, remain committed to our dividend, of course, subject to Board approval. Our dividend has and will remain an integral part of our [total shareholder return] algorithm over the long-term, and the recent actions we've taken to shore up liquidity give testament to our ability to continue to support the dividend.– CFO Scott Roe The COVID-19 crisis has forced V.F. Corp and most of its customers (other [...]