UPDATE 1-Canada's Tim Hortons raises dividend, details buyback

Feb 20 (Reuters) - Canadian coffee and doughnut chain Tim Hortons said it would buy back up to C$440 million ($399 million) in shares and raise its quarterly dividend, in the face of pressure from shareholders to return capital.

Tim Hortons, which says it sells eight out 10 cups of coffee in Canada, is expanding its food menu in pursuit of growth in its saturated home market but that means increasing competition with the likes of McDonald's Corp.

Fourth-quarter same-store rose increased 1.6 percent in Canada and 3.1 percent in the United States, although both growth rates slowed from the same quarter a year ago.

The company, which is set to unveil a new five-year strategy next week, said it expected sales at established stores in Canada to increase 1-3 percent this year and those in the United States to rise 2-4 percent.

Hortons raised its quarterly dividend to 32 Canadian cents per share from 26 Canadian cents per share. The dividend is payable on March 18, to shareholders of record as of March 3.

Net income per share attributable to Tim Hortons for the quarter ended Dec. 31 rose to 69 Canadian cents per share, from 65 cents per share a year earlier, bolstered by share buybacks that led to a decrease of 8.6 million shares outstanding from a year earlier.

The planned share repurchase announced on Thursday fleshes out a previously announced program to buy back up to C$1.2 billion in shares through August.

Fourth-quarter revenue rose 11 percent to C$898.5 million.

On an average, analysts had expected a profit of 76 Canadian cents per share and revenue of C$836.8 million, according to Thomson Reuters I/B/E/S.

The company forecast a full year profit of C$3.17 to C$3.27 per share.