Wolseley said it would pay a final dividend of 55 pence per share, bringing its full-year total to 82.5 pence per share, 25 percent higher than last year, and announced a 250 million pound share repurchase plan.

"Wolseley continues to be highly cash generative and we have adequate resources to fund future investment in the business, including bolt-on acquisitions and growth in ordinary dividends," chief executive Ian Meakins said in a statement on Tuesday, adding that the payouts reflected management's confidence in the business.

The company, which operates the Plumb Center and Ferguson chains in the United States and Britain, reported an 8.6 percent rise in trading profit to 761 million pounds on a constant foreign exchange basis for the 12 months ended July 31.

Analysts had expected a trading profit of 750 million pounds, according to a company-supplied consensus forecast.

In the U.S. business, which accounts for over half of the company's sales, Wolseley said it benefited from new residential construction markets and growth in market share, offsetting weaker markets in continental Europe.

The company forecast underlying revenue growth for the next six months of about 5 percent, above the 4 percent level it had guided to at the time of its third quarter results in June.

Shares in the FTSE 100 company, which has a market capitalisation of about 8.7 billion pounds, gained 0.9 percent to 32.85 pounds at 0736 GMT.

"The outlook for growth in most of Wolseley's main markets is positive, with the exception of central Europe, France and Finland, and we believe there is scope for the stock to break upwards out of its year-long trading range," Bank of America Merrill Lynch analysts said in a note.

The broker has a "buy" rating on the stock with a "price objective" of 40 pounds per share. Wolseley's shares have broadly traded in the 30-35 pound range over the last 12 months.

(Reporting by Sarah Young; editing by Jason Neely/Keith Weir)

By Sarah Young