Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Beijing Urban Construction Design & Development Group Co Limited (HKG:1599) has recently paid dividends to shareholders, and currently yields 4.3%. Should it have a place in your portfolio? Let’s take a look at Beijing Urban Construction Design & Development Group in more detail.

View our latest analysis for Beijing Urban Construction Design & Development Group

How I analyze a dividend stock

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

• Is it the top 25% annual dividend yield payer?

• Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

• Has it increased its dividend per share amount over the past?

• Is is able to pay the current rate of dividends from its earnings?

• Will it be able to continue to payout at the current rate in the future?

How well does Beijing Urban Construction Design & Development Group fit our criteria?

The current trailing twelve-month payout ratio for the stock is 24%, meaning the dividend is sufficiently covered by earnings. Going forward, analysts expect 1599’s payout to increase to 29% of its earnings, which leads to a dividend yield of around 7.2%. Furthermore, EPS should increase to CN¥0.53. The higher payout forecasted, along with higher earnings, should lead to greater dividend income for investors moving forward.

When considering the sustainability of dividends, it is also worth checking the cash flow of a company. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

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 Beijing Urban Construction Design & Development Group as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, Beijing Urban Construction Design & Development Group has a yield of 4.3%, which is high for Construction stocks but still below the market’s top dividend payers.

Next Steps:

If you are building an income portfolio, then Beijing Urban Construction Design & Development Group is a complicated choice since it has some positive aspects as well as negative ones. However, if you are not strictly just a dividend investor, the stock could still offer 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. There are three key aspects you should further examine:

1. Future Outlook: What are well-informed industry analysts predicting for 1599’s future growth? Take a look at our free research report of analyst consensus for 1599’s outlook.

2. Valuation: What is 1599 worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether 1599 is currently mispriced by the market.

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.