Canada's sixth-largest bank is hiking its dividend and buying back some of its shares, National Bank announced Friday along with a second-quarter profit that beat analyst estimates by a wide margin.

Montreal-based bank said its adjusted earnings hit a record $369 million — up six per cent from the same time last year. That equalled $2.08 per share, a seven per cent increase from $1.95 per share in the same quarter last year.

National Bank's net income also beat analyst estimates but was down year-to-year, due to an unusual $198-million gain that it recorded in the second quarter of its 2012 financial year.

Net income equalled $2.49 per share, or $434 million, down from $553 million or $3.22 per share in the quarter ended April 30, 2012.

Revenue dropped eight per cent to $1.386 billion from $1.499 billion.

Analysts had been looking for National Bank to produce $1.98 per share in adjusted earnings and $1.99 per share in net income with $1.26 billion of revenue, according to a consensus estimate from Thomson Reuters.

The bank says its quarterly dividend on common shares will rise by five per cent to 87 cents per share, starting with the August payout.

It also announced a share buyback program that will enable it to repurchase and cancel up to 3,246,676 common shares in the 12 months beginning June 20.