City Holding Boosts Dividend 10% on Record Annual Profit
Shares climb as strong shareholder returns help investors look past a sequential dip in the bank's key lending margin.
City Holding Company (NASDAQ: CHCO) announced a significant 10.1% increase to its quarterly dividend after reporting record annual earnings for 2025, signaling confidence in its financial standing despite pressures on lending profitability that are weighing on the banking sector.
Shares in the Charleston, West Virginia-based financial institution rose over 1% in trading to $123.17 following the news. The bank, which has a market capitalization of approximately $1.79 billion, raised its quarterly dividend to $0.87 per share. This move underscores a banner year for the company, which reported record diluted earnings per share of $8.93 for 2025.
The robust annual performance was supported by a solid fourth quarter. According to a regulatory filing with the SEC, City Holding posted fourth-quarter earnings of $2.18 per diluted share, narrowly beating analyst estimates of $2.155. This represents a 1.2% beat on expectations and a continuation of the bank's strong profitability.
"This past year's results reflect our ongoing commitment to creating long-term value for our shareholders," the company stated in its announcement, highlighting the record earnings as a key driver for the substantial dividend increase.
However, the celebratory headline figures were accompanied by a data point that has captured the attention of investors and likely explains Wall Street's measured reaction. The bank's net interest margin (NIM)—a crucial indicator of a bank's core profitability from lending—experienced a sequential decline, falling to 3.94% in the fourth quarter from 4.04% in the previous quarter.
This 10-basis-point contraction points to the broader challenges facing regional banks. As the cost of holding customer deposits rises, banks across the industry have seen their lending margins squeezed. While City Holding’s margin remains comparatively strong, the decline suggests it is not immune to the sector-wide trend.
This dynamic appears to be reflected in the current analyst consensus. Despite the record profits and shareholder-friendly actions, all five analysts covering the stock currently rate it as a 'Hold'. The average analyst price target stands at $129.60, suggesting only modest upside from its current trading price, which is already approaching its 52-week high of $131.71.
Investors are now weighing the attractive dividend, which provides a yield of more than 2.8% at the new rate, against the potential for slowing profit growth if margins continue to compress. With 72.7% of its shares held by institutions, a sophisticated investor base is closely monitoring whether City Holding can maintain its earnings momentum.
For now, the bank's robust capital position and its demonstrated commitment to returning that capital to shareholders are the prevailing narrative. The outlook for City Holding will depend on its ability to navigate the interest rate environment and stabilize its lending margins while continuing to execute on its growth strategy.