“Citigroup Inc., in a significant change in the way it rewards investors, declared a 75% increase in its dividend, a move that more companies are expected to follow as earnings announcements pick up this week,” writes Ken Brown in today’s Wall Street Journal.

“Dividends, those quarterly payouts that investors and companies dismissed as irrelevant during the stock-market bubble, are back in vogue, driven by improving business conditions, investors seeking the relative safety of dividend-paying stocks and, perhaps most important, a tax cut that has made dividends more valuable to individuals.”

” ‘It’s on everyone’s mind, it’s on everyone’s calendar, you know it’s in every boardroom,’ said Howard Silverblatt, a quantitative analyst at Standard & Poor’s. ‘This looks like it’s getting more attention than earnings.’ “

“Citigroup’s annual dividend is jumping to $1.40 a share from 80 cents. While boosting its dividend, Citigroup, which also posted a 5% quarterly earnings rise, said it would cut back on share repurchases. It cited the new tax law, which makes dividends just as attractive as share repurchases, which are designed to boost stock prices and had become the most favored way for companies to return cash to shareholders. “This substantial increase in our dividend will be part of our effort to reallocate capital to dividends and reduce share repurchases,” said Sanford I. Weill, Citigroup’s chairman and chief executive.”

“Citigroup, the sixth-largest stock by market capitalization, said that the dividend increase will be funded with capital previously used to buy back shares. The dividend program will cost the company about $1.8 billion per quarter, up from about $1 billion before the increase. During the second quarter, the company spent $359 million buying back shares, down from $1.2 billion in the first quarter, to preserve capital for the dividend increase, according to Todd Thomson, the company’s chief financial officer.”

“One of the largest beneficiaries of the dividend increase will be Mr. Weill himself, who owned 22.4 million shares of stock as of July 1. His annual dividend income will rise to $31.4 million, up from $17.9 million previously.”

“Companies including Procter & Gamble Co., Goldman Sachs Group Inc. and Walgreen Co. have boosted their dividends in the past few weeks while World Wrestling Entertainment Inc. and, most notably, Microsoft Corp. said they would start making payouts to shareholders, citing the new tax law and improving business conditions. Just Monday, Fannie Mae, the mortgage-finance company, also raised its dividend, increasing the payout by 15% to an annual $1.80 a share. So far this year, 125 companies in the Standard & Poor’s 500-stock index have raised their dividends, compared with 104 at this time last year, according to S&P.”

“The shift by Citigroup in the way it rewards shareholders came a week after Microsoft, the market’s biggest company, announced that it would ditch one of the technology world’s biggest stock-options compensation programs, in favor of restricted-stock awards. Such shares can typically be sold only in future years. In both instances, the powerhouses from vastly different sectors are focusing on long-term performance: Both dividends and restricted stock reward patience rather than the get-rich-fast-at-any-cost attitude that prevailed during the stock-market bubble.”

“Indeed, the general shift toward dividends is occurring in tandem with a shift in compensation plans away from stock options and toward giving employees restricted stock. Microsoft switched from options to restricted stock just months after it paid its first-ever dividend, and Citigroup said it was continuing to shift toward restricted stock and away from options.”