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Survey and Market‐based Evidence of Industry‐dependence in Analysts’ Preferences Between the Dividend Yield and Price‐earnings Ratio Valuation Models
Author(s) -
Barker Richard G.
Publication year - 1999
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00261
Subject(s) - valuation (finance) , earnings , dividend yield , dividend , yield (engineering) , economics , dividend payout ratio , robustness (evolution) , econometrics , financial economics , business , accounting , dividend policy , finance , biochemistry , chemistry , materials science , gene , metallurgy
Prior research has shown that analysts’ preferred valuation models are the price‐earnings (PE) ratio and the dividend yield. This paper presents strong evidence that the relative importance of these two models varies according to stock market sector. Companies in the services, industrials and consumer goods sectors are shown to be ‘PE‐valued’ while financials and utilities companies are shown to be ‘yield‐valued’. These findings are derived from survey research and then tested in a market‐based model. This use of independent, mutually reinforcing research methods contributes to the robustness of the findings.