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Dividends play a key role in compounding returns over time and can form a large part of our portfolio return. Xinte Energy Co Ltd (HKG:1799) has recently paid dividends to shareholders, and currently yields 2.8%. Should it have a place in your portfolio? Let’s take a look at Xinte Energy in more detail.

View our latest analysis for Xinte Energy

Here’s how I find good dividend stocks

When researching a dividend stock, I always follow the following screening criteria:

• Is its annual yield among the top 25% of dividend-paying companies?

• Has it paid dividend every year without dramatically reducing payout in the past?

• Has dividend per share amount increased over the past?

• Can it afford to pay the current rate of dividends from its earnings?

• Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

Does Xinte Energy pass our checks?

Xinte Energy has a trailing twelve-month payout ratio of 18%, meaning the dividend is sufficiently covered by earnings. Furthermore, analysts have not forecasted a dividends per share for the future, which makes it hard to determine the yield shareholders should expect, and whether the current payout is sustainable, moving forward.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Cash flow is important because companies with strong cash flow can usually sustain higher payout ratios.

If there’s one type of stock you want to be reliable, it’s dividend stocks and their stable income-generating ability. Unfortunately, it is really too early to view Xinte Energy as a dividend investment. It has only been consistently paying dividends for 2 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

Relative to peers, Xinte Energy produces a yield of 2.8%, which is on the low-side for Construction stocks.

Next Steps:

Now you know to keep in mind the reason why investors should be careful investing in Xinte Energy for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I urge potential investors to try and get a good understanding of the underlying business and its fundamentals before deciding on an investment. I’ve put together three important factors you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 1799’s future growth? Take a look at our free research report of analyst consensus for 1799’s outlook.

2. Historical Performance: What has 1799’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.

3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.

The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.