UPDATE 1-Ferguson raises dividend as profit jumps on U.S. home improvement demand

Adds details of dividend, buyback, CEO quote, background

March 16 (Reuters) - Plumbing and heating parts distributor Ferguson Plc FERG.L raised its dividend and announced a share buyback on Tuesday after posting a higher half-year profit, buoyed by cost control measures and strong U.S. home improvement demand.

The London-listed company, which has a secondary U.S. listing, said half-year profit jumped 12.2% as residential operations sales recovered with housing activity picking up in the United States, its biggest market by revenue.

Ferguson's performance followed its U.S. peers Home Depot HD.N and Lowe's Cos Inc LOW.N, who have also benefited from stuck-at-home Americans snapping up building materials all through the COVID-19 lockdowns. However, vaccine roll out and return to normalcy have led many to believe that the trend could fade for home-improvement chains. nL4N2KT2F3 nL4N2KU3EL

The company expects revenue growth in residential operations to be partially offset by "increasing supply chain pressures, transportation costs and reversal of temporary cost reduction actions" taken during the initial stages of the lockdown in 2020, Chief Executive Officer Kevin Murphy said.

Ferguson's underlying trading profit rose to $837 million for the six months ended Jan. 31 from $746 million a year ago.

The Virginia, U.S.-headquartered company also raised interim dividend to 72.9 cents per share, which it said will be paid in May, and announced a $400 million share buy back.

The demerger of Wolseley UK, aimed at allowing the group to focus solely on its main U.S. business, paid off, with the company expecting to pay a special dividend of 180 cents per share, or $400 million in May 2021.

(Reporting by Vishwadha Chander and Pushkala Aripaka in Bengaluru; Editing by Rashmi Aich)

((Vishwadha.Chander@thomsonreuters.com; within U.S. +1 646 223 8780, outside U.S. +91 80 6749 6132;))