City Bank
triples dividendThe company also says
it has strengthened its
'poison pill' defense
Bolstering its commitment to remain independent, City Bank's parent company said yesterday it is more than tripling its dividend and strengthening its poison pill to potentially ward off future takeover attempts.
CB Bancshares Inc. declared a third-quarter cash dividend of 36 cents a share, the highest in its history, which will boost its annualized payout to 2.3 percent from 0.7 percent, based on yesterday's closing stock price of $62.44. The 230 percent, or 25-cents-a-share, increase marks the second consecutive quarter that the bank has boosted its dividend. In April, CB declared a 12-cents-a-share dividend, which was adjusted to 10.9 cents because of a 10 percent stock dividend that the bank also announced.
The new dividend is payable Sept. 29 to shareholders of record Sept. 15.
CB Chairman Lionel Tokioka said federal legislation that lowered the dividend tax rate to 15 percent was one of reason behind the move. He also said the new dividend level "reflects our solid second-quarter performance and underscores our confidence in our financial strength and future earnings potential."
"We believe this step is an effective use of cash that makes sense for our shareholders and our company," Tokioka said.
CB's dividend yield has been out of line with the other Hawaii banks since its stock jumped 50 percent in April following Central Pacific Financial Corp.'s announcement that it was making an unsolicited bid to acquire the bank.
CPF said in June it is maintaining its second-quarter dividend at 16 cents a share, giving it a current yield of 2.4 percent. Among other Hawaii banks, Bank of Hawaii Corp. pays a dividend of 19 cents a share, or 2.2 percent, while Hawaiian Electric Industries Inc., which owns the state's largest utility in addition to American Savings Bank, pays 62 cents a share, or 5.8 percent.
"What's going on right now is many companies are raising their dividends to attract shareholders," said Barry Hyman, vice president of Financial & Investment Management Group Ltd. in Wailuku, Maui. "In the olden days before stock mania, stockholders looked at stocks as a total investment return. But with the popularity of stock investing in the last decade, especially in technology stocks that don't pay much, if any, in the way of dividends, investors have been conditioned to favor capital gains over total returns.
"Now, with the introduction of this favorable tax treatment of dividends, along with a dose of reality from the 3-year bear market, investors are behaving more like investors of old and giving due value to dividends."
CB's amendment to its shareholders-rights plan, commonly referred to as a poison pill, makes it tougher for the bank to be acquired. The new poison pill will go into effect Aug. 4 and will co-exist with the current plan that applies to the current hostile bid by CPF. The major difference in the new plan is that the poison pill will be triggered when a person or company acquires voting control of 15 percent or more of CB shares instead of the previous 20 percent level. Once the provision is triggered, one right to buy an additional share at a discount will be distributed as a dividend for each share of CB stock.
"Our board considered it in the best interests to adopt a new plan in light of the numerous developments and innovations in shareholders-rights plans since we adopted this in 1989," CB spokesman Wayne Miyao said. "We feel the new plan is more consistent with the terms and conditions of plans that were more recently adopted by public companies."
