NEW YORK ( TheStreet) -- Goldman Sachs ( GS) raised its quarterly dividend by 31% to 46 cents per share -- marking its first dividend increase since 2006 -- but the move may be just some financial sleight of hand to distract investors from meager buyback plans in 2012.

The dividend move took analysts by surprise because the investment bank has historically shown a preference towards buybacks.

Atlantic Equities Richard Staite, however, noted that the $1.84 in annual dividend would represent only a 15% payout ratio in 2012, based on his forecast.That's a paltry shareholder gift compared to 2011 when Goldman repurchased $6 billion of its own shares shares in 2011; more than it earned for the entire year.

The management has warned that investors should not expect the bank to repeat buybacks in a similar scale. In the first quarter of 2012, Goldman repurchased only 3.3 million shares for $362 million, relying instead on smaller purchase plans..

CFO David Viniar said during the conference call that the dividend increase was prompted by shareholder feedback, but indicated that the bank continues to see buybacks as an attractive way to return capital to shareholders, as shares continue to trade below tangible book value.

The only thing that would prevent the company from considering buying back shares would be "an inability to predict where Dodd Frank is going" and the need to keep dry powder to deal with the regulatory uncertainty and evolving landscape, Viniar said.

Viniar would not comment on Goldman's capital return request to the Fed except to say it included a request for both dividend and buybacks.

Some analysts had wondered if the request had been limited to just a modest dividend increase, given that the Fed's estimated capital ratios post buybacks and dividends for Goldman was 5.7%, just a tenth lower than 5.8% assuming no capital was returned.

"We do not know how the Fed did its calculations," Viniar said in response to an analyst's question on the matter.

Goldman Sachs shares were not reacting much to the dividend bump, possibly due to its relative underperformance in fixed income trading versus JPMorgan Chase and Citigroup.

Banks have shown a preference for buybacks to dividends because a firm can elect to buy back shares anytime it wants, depending upon market conditions and the operating environment.

This offers them the option to build capital when the environment takes a turn for the worse.

They tend to have less flexibility with dividends. Failure to pay dividends or a reduction in dividend is often treated as a really bad signal by the market.

From that perspective, Goldman's dividend increase could be seen as a particularly bold signal on part of the management.

-- Written by Shanthi Bharatwaj in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.