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CYN to Boost Shareholders' Value

BEN CYN

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Last week, City National Corporation (CYN - Snapshot Report) increased its common stock dividend payable in the fourth quarter of 2012 by virtue of a special dividend announced for shareholders. Along with the regular quarterly common stock dividend of 25 cents per share, the company made an announcement of a special dividend of 25 cents to be paid in the fourth quarter.

These dividends, which summed to 50 cents per share, will be paid on December 18 to shareholders of record as of December 3. Yet, the company’s third-quarter dividend announced on October 18 will be paid on November 21, 2012.

The special dividend is part of City National Corporation’s long-term strategy to enhance shareholder value through prudent capital management. The strategy also includes investment in profitable businesses while sustaining financial stability and flexibility.

Previously, City National Corporation bolstered its dividend by 25% (from 20 cents to 25 cents per share) in January 2012, reflecting the company’s commitment to return value to shareholders with its strong cash generation capabilities.

Based in Los Angeles, California, City National Corporation operates as the bank holding company for City National Bank. With $26.3 billion in total assets, the company provides various banking products and services through 78 offices in Southern California, the San Francisco Bay Area, Nevada, New York City, Nashville and Atlanta.

In October, City National Corporation reported its third quarter 2012 earnings of $1.10 per share, exceeding the Zacks Consensus Estimate of 92 cents. This compared favorably with the prior-quarter earnings of 77 cents. City National Corporation’s better-than-expected results benefited from the augmentation in non-interest income and net interest income. However, these positives were partially offset by a rise in operating expenses.

The company paid roughly $40 million in dividends to common shareholders for the nine months ended September 30, 2012. Cash and due from banks exiting the third quarter of 2012 was $235 million.

Based on the company’s capital strength and positive earnings, this special dividend declaration is expected to boost investors’ confidence in the company. Moreover, the recently completed acquisition of Rochdale is expected to strengthen its financial results. However, the regulatory restrictions and sluggish economic recovery could mar the growth and increase costs.

City National Corporation currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We believe the announcement of special dividend will be an appropriate step for the company in boosting shareholders’ confidence, which might lead to positive estimate revisions. This, in turn, could cause an improvement in the Zacks Rank.

Among others, California-based Franklin Resources Inc. (BEN - Analyst Report), a global investment management company, also announced a special cash dividend of $3.00 per share, which will be paid on December 20, 2012 to stockholders of record as on December 6.

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