UK's Howden raises dividend, to return 70 mln stg to shareholders

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Feb 26 (Reuters) - Modular kitchen maker Howden Joinery Group Plc, reaping the benefits of a strong UK housing market, raised its dividend and said it would spend 70 million pounds ($109 million) to buy back its own shares over the next two years.

Howden's shares rose as much as 4.7 percent in early trading on Thursday, making the stock the top percentage gainer on the FTSE-250 Midcap Index.

A recovery in the UK economy and record-low interest rates encouraged many Britons to buy houses last year, although demand has been slowing recently due to tougher mortgage rules that limit access to cheap cash and the approaching general election.

Howden, which sells kitchens and joinery products used by landlords, local authorities, housing trusts and developers, reported a 40 percent rise in full-year profit.

"The board has reviewed the cash balances in light of the group's future investment opportunities, expected peak working capital requirements and trading outlook," the company said, explaining its decision to raise the dividend and buy back shares.

The company raised its annual dividend to 8.4 pence per share from 5.5 pence.

Howden's pretax profit rose to 188.8 million pounds in the year ended Dec. 31, from 135 million pounds a year earlier. Revenue rose 14 percent to 1.09 billion pounds.

Analysts on average had expected a pretax profit of 182.99 million pounds on revenue of 1.086 billion pounds, according to Thomson Reuters I/B/E/S.

Howden had foreshadowed in January that its pretax profit would be better than the average market estimate. The company also raised its forecast in November.

Howden's shares were up 3.6 percent at 455 pence at 0833 GMT.

($1 = 0.6436 pounds) (Reporting by Esha Vaish in Bengaluru; Editing by Ted Kerr)