IBM's board on Tuesday raised its dividend by 10 percent and authorized an additional $3 billion worth of share buybacks, underscoring the technology company's relative strength even in a weak economy.

International Business Machines Corp said it would begin paying a quarterly dividend of 55 cents per share, up from the previous 50 cents. It is the 14th year in a row that the company has raised its dividend.

Prior to the latest increase, IBM -- which has a market value of over $130 billion -- had about $3.7 billion remaining from a previously authorized buyback plan at the end of March.

IBM shares rose 2.5 percent to $102.46 at mid-afternoon on the New York Stock Exchange.

With the strengthening of our business, we're very comfortable continuing to return profits to our investors even in this difficult environment when others cannot, said Jesse Greene, IBM's vice president of financial management.

IBM's quarterly revenue fell by 11 percent in the first quarter, but cost-cuts helped limit the fall in net profit. Analysts say the company's shift to higher-margin software and services, from hardware, has helped shield it from the worst of the global economic slowdown.

Greene said IBM was committed to returning profit to shareholders, but its primary focus was to invest in its business.

The company had offered to buy high-end server maker Sun Microsystems Inc but its price was rejected as too low, according to sources with knowledge of the matter, and Sun chose to sell itself to Oracle Corp instead.

It's research and development, it's capital expenditure, it's acquisitions where they are appropriate and properly priced, Greene said. I would always go back to the efforts we take to strengthen our business as the primary investment that we make.

(Reporting by Ritsuko Ando, editing by Gerald E. McCormick, Richard Chang)

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