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Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Xinte Energy Co., Ltd. (HKG:1799) has recently paid dividends to shareholders, and currently yields 2.3%. Does Xinte Energy tick all the boxes of a great dividend stock? Below, I'll take you through my analysis.

Check out 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 it paying an annual yield above 75% of dividend payers?

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

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

• Is its earnings sufficient to payout dividend at the current rate?

• Will it have the ability to keep paying its dividends going forward?

How does Xinte Energy fare?

Xinte Energy has a trailing twelve-month payout ratio of 14%, 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. A business with strong cash flow can sustain a higher divided payout ratio than a company with weak cash flow.

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 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.

In terms of its peers, Xinte Energy produces a yield of 2.3%, 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. There are three pertinent aspects you should look at:

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.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.