Wells Fargo Boosts Dividend (Update2)

Updated from 9:54 a.m. EDT.

Wells Fargo(WFC Quote) surged 24% Wednesday morning after the big mortgage lender said it was increasing its dividend by 10% and posted better-than-expected second-quarter earnings results.

The San Francisco-based bank declared a quarterly common stock dividend of 34 cents a share, up from its previous dividend of 31 cents a share. The dividend increase overshadowed the company's 23% drop in quarterly profit from a year earlier, according to second quarter results released on Wednesday.

News of the dividend increase sent shares up $4.85 to $25.36 in recent trading, as investors breathed a sigh of relief amid a troubled banking environment. A dividend increase by any bank will be rare this earnings season, particularly as they look to shore up capital as loan losses mount. Other banks that have cut their dividend this year include Citigroup(C Quote), Washington Mutual(WM Quote) and National City(NCC Quote), among others.

Wells Fargo, while it has not been immune to the soured housing market and deteriorating home prices, particularly related to its home equity portfolio, it has nonetheless remained relatively unscathed through the credit crisis.

"This increase which reflects the company's performance and our confidence in its long-term growth, is possible because of our time-tested vision and values, diverse business model and our talented team," CFO Howard Atkins said in a statement

Wells Fargo is one of the few financial institutions that has continued to increase its annual dividend, which exceeds $4.5 billion, Atkins added.

Wells Fargo said that it made $1.75 billion, or 53 cents a share, in the second quarter, compared to $2.28 billion, or 67 cents a share, in the year-earlier period. Still, the company managed to beat earnings estimates by 3 cents a share even as the economy softened and the housing market continued to take its toll on large and small banks in the second quarter.