UPDATE 1-Walgreen raises quarterly dividend 22.2 pct

* Raises quarterly div to 13.75 cts/shr vs 11.25 cts/shr

SAN FRANCISCO, July 8 (Reuters) - Walgreen Co (WAG.N), the largest U.S. drugstore chain by revenue, announced on Wednesday a 22.2 percent increase in its quarterly dividend, saying it is confident in its ability to generate strong free cash flow.

The company raised its dividend to 13.75 cents per share from 11.25 cents per share. The dividend is payable Sept. 12 to shareholders of record Aug. 21.

To appeal to cash-strapped shoppers amid the recession, Walgreen has been promoting "affordable essentials" such as toilet paper. It has also slowed store opening plans and is giving its stores a new look, with lower shelves and a smaller selection of items.

"This dividend increase reiterates our confidence in our key growth strategies and our ability to generate strong free cash flow in the future," CEO Greg Wasson said in a statement.

(Reporting by Nicole Maestri; Editing by Richard Chang)