NEW YORK (Dow Jones) - Time Warner Inc. (TWX) Chairman and Chief Executive Dick Parsons said the media conglomerate recently considered spinning off America Online but decided such a move was unnecessary for now.

At the company's annual shareholder meeting, Parsons told investors that executives had considered spinning off the unit as a separately traded stock to create a currency for the unit to make acquisitions.

The move would have been similar to the company's planned spinoff of its cable-television unit following the completion of its acquisition of Adelphia Communications Corp. (ADELQ), he said.

But AOL management deemed the move was unnecessary "at this point in time," he said.

"Right now AOL is currently integrated into our operations," Parsons said. " But if it gets to the point where consolidation is happening in the Internet space and, in order to play most efficiently, we need...our own currency, the possibility (of an IPO) is out there."

Time Warner, which bought Adelphia in a deal with Comcast Corp. (CMCSA, CMCSK) , plans to spin off Time Warner Cable as a separate publicly traded company, which it will control. That will provide the unit with a currency for acquisitions in the consolidating cable business.

The same rationale could make sense for AOL, Parsons said. "There are a lot of little (Internet) companies out there."

With the 2001 merger of Time Warner and AOL failing to live up to expectations, speculation has long swirled that Time Warner would shed the unit.

Parsons acknowledged that the merger "may not have worked out exactly as people, including myself, had thought and hoped," but added that AOL is an important part of Time Warner.

AOL "is our play in the fastest-growing space in the economy," a play no other major media conglomerate has, he added.

AOL is launching a revamped version of its Internet portal later this year, in a bid to capture more dollars from the fast-growing online ad market.

The unit has been struggling as thousands of its dial-up subscribers defect to faster or cheaper competitors. It hopes to offset that loss with increased advertising.

Parsons told Fortune magazine in an article published earlier this week that Time Warner would consider spinning off AOL if that strategy fails to live up to expectations. Time Warner would still control the unit under that scenario, the article said.

Meanwhile, some investors at the meeting bemoaned Time Warner's weak stock price and criticized the company's plan, unveiled Friday, to begin paying a quarterly dividend of 5 cents a share as paltry.

CEO Parsons countered that "things are moving in the right direction."

He noted that the company's stock price gained 37% in 2003, as well as 8% in 2004, which was in line with the market.

"Things may not be moving as fast" as investors, or Time Warner executives, would like, but "we're doing things to get in a position where shareholders feel rewarded" and so that the stock can outperform the market, he said. "The dividend will help."

Time Warner plans to begin paying a dividend of five cents a share starting in the third quarter.

The move comes as the company has been mulling ways to return value to shareholders since paying down a heavy debt load over the past three years. Time Warner's last dividend payment, of 4.5 cents, was in December 2000, just before it closed its merger with AOL.

The dividend adds up to an annual payout of about $940 million, or 26.5% of a J.P. Morgan estimate for 2005 free cash flow of $3.5 billion .

Separately, Time Warner shareholders approved the election of a slate of 15 board nominees.

Each director, including two new nominees, got at least 93% of the votes cast, according to a preliminary tally.

Shares of Time Warner slipped 0.7%, or 13 cents, to $17.62 .