J.P. Morgan & Co. raised its quarterly dividend to 68 cents a share from 60 cents, an increase of 13.3%.

The unexpectedly large hike sent Morgan's shares up $1.50, to close at $72.75 Wednesday.

Over the past 10 years, Morgan's dividend increases have averaged about 10%, said Raphael Soifer, money-center analyst at Brown Brothers Harriman & Co.

In raising the payout by over 13%, Morgan is "clearly sending a signal about its confidence in the future," he added.

Frank DeSantis at Donaldson, Lufkin & Jenrette Securities Co. agreed, saying the the action demonstrates Morgan's confidence in the sustainability of its strong earnings.

Stock Buyback Set

Mr. Soifer reiterated his "buy" rating on the stock on Wednesday after the dividend announcement.

Morgan also said its board approved the repurchase of up to seven million shares of common stock to lessen the dilutive effects of its employee benefit plans.

The purchases will be made periodically in the open market, or in private deals.

Morgan said it has already purchased about two million shares for its employee benefit plans in 1993.

Up to now, Morgan has tended to fund its employee benefit programs by issuing new stock, which diluted its earnings per share.

Above-Average Yield

While the repurchase program is favorable for the stock, Mr. Soifer said investors were reacting mainly to the dividend news in bidding up Morpn's share price Wednesday.

At the new annualized dividend rate of $2.72 a share, Morgan's stock was yielding 3.74%, based on Wednesday's closing price.

That's an above-average yield for a bank stock, and Morgan is a premier banking company, Mr. Soifer said.

Discount Discontinued

As part of Thursday's dividend announcement, Morgan also said it will no longer offer a 3% discount off market price on shares purchased through its dividend reinvestment plan.

The discontinuation of the discount is effective April 15, 1994, which is the payment date for the fourth-quarter dividend, payable to stockholders of record on Dec. 20.

Morgan chairman Dennis Weatherstone said in a statement Wednesday that the company's "excellent financial performance and strong capital base" support the dividend increase.

Morgan also declared a $5 annual dividend on its Series A adjustable-rate cumulative preferred stock.

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