Page 6 - Valuation in Abnormally Uncertain Times

EARNINGS YIELD AS A PROXY FOR REQUIRED EQUITY RETURNS INCREASED

The Earnings Yield — the Earnings per Share divided by the Share Price — can be viewed as a proxy for the required returns
on shareholders equity. An increasing Earnings Yield implies a higher required return from shareholders. We set out below the
median Earnings Yield from 31 December 2019 to 30 April 2020:

Median Earnings Yield (%)
Industry
31/12/2019 31/01/2020 29/02/2020 31/03/2020 30/04/2020
Communication Services 3.5% 4.8% 5.2% 7.1% 6.0%
Consumer Discretionary 4.8% 4.9% 5.1% 6.5% 5.5%
Consumer Staples 4.4% 4.6% 4.5% 6.2% 5.8%

Energy 6.7% 6.4% 7.7% 7.6% 9.7%
Financials 6.0% 6.4% 6.0% 7.0% 7.1%
Health Care 4.5% 3.9% 4.3% 4.9% 4.0%
Industrials 5.6% 5.7% 5.3% 6.9% 6.2%
Information Technology 5.9% 6.0% 6.7% 8.5% 7.4%
Materials 5.2% 5.3% 5.2% 6.3% 6.8%
Real Estate 3.3% 3.4% 3.7% 5.1% 4.4%

Utilities 9.5% 9.7% 12.3% 14.9% 14.1%
Total 4.9% 5.1% 4.9% 6.4% 5.7%
% change from 31 December 2019 0.2% 0.1% 1.6% 0.8%

Source: CapitalIQ

▪ The median Earnings Yield increased from 4.9% to 6.4% in the first quarter 2020, equivalent to an increase of 1.6% points.

▪ Due to the rebound in share prices by 30 April 2020, the median Earnings Yield decrease to 5.7% from 31 March 2020.
However, the median Earnings Yield is still 0.8% points higher than that as at 31 December 2019.

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