JPMorgan Chase & Co. Inc. announced that it is slashing its quarterly dividend to just US5¢ a share from US38¢ as a “precautionary measure” to help preserve capital amid a deteriorating economy.

The firm’s board of directors, which made the dividend reduction decision, anticipates maintaining this level “for the time being.” It notes that the dividend cut will enable the company to retain an additional $5 billion in common equity per year.

It says that its first-quarter 2009 financial performance to date is “solidly profitable even after significant additions to reserves, and the outlook for the quarter is roughly in line with analyst expectations.”

Said JPMorgan CEO Jamie Dimon: “While we recognize our tremendous obligation to shareholders to maintain dividend levels, we also understand that extraordinary times require extraordinary measures. Our action today is being done as a strong precautionary measure to help ensure that our fortress balance sheet remains intact – even if conditions worsen significantly. As always, our highest obligation during an economic crisis is to keep our company and franchise healthy, vibrant and strong for the future.”

He added that although the bank’s “performance and capital are already strong, today’s action provides us with maximum flexibility to protect our company in a more highly stressed environment and to continue to build and invest in our market-leading businesses. Today’s capital action is not directly related to the Troubled Asset Relief Program. Our reason for accepting TARP capital still holds — namely to help stabilize the banking system and economy. The decision to retain additional common equity does, however, help position our company to repay TARP as soon as is prudent — and still maintain a strong capital position. Our repayment of TARP will ultimately be worked out in consultation with the U.S. Treasury and other regulators, and in consideration of the best interests of the banking system overall.”

J.P. Morgan said it hopes to return to a more normalized dividend payout ratio as soon as feasible after the environment has stabilized.