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.