* Raises around $1 billion from 22 pct stake sale
* To spend 300 mln stg on share buyback
* Shares fall on future dividend plan (Adds analyst comments, background, detail, shares)
LONDON, July 11 (Reuters) - Pearson is set to raise $1 billion from the sale of a 22 percent stake in book publisher Penguin Random House to majority owner Bertelsmann, in the British group's latest bid to rebuild following a string of profit warnings.
Hit by a sharp downturn in its biggest markets, Pearson has sold off some of its best known assets in recent years including the Financial Times and the Economist to enable it to invest in its core business of education.
The 173-year-old group said on Tuesday it would now reduce its stake in the world's biggest consumer book publisher to 25 percent from 47 percent, enabling it to free up cash to return to shareholders and bolster its balance sheet.
Shares in the group initially jumped more than 3 percent on the news but were down 6 percent by 0900 GMT as analysts processed what the deal would mean for future dividends, with many estimates coming in below expectations.
"Today's deal enables us to realise a significant amount of the value that we've helped to create (at Penguin Random House) whilst continuing to be part of what is the world's biggest and best trade publisher," said Chief Executive John Fallon.
"We'll be using the proceeds to maintain our strong balance sheet, to invest in the ongoing digital transformation of Pearson and return 300 million pounds in excess capital to shareholders."
Established as a joint venture between Pearson and Bertelsmann in 2013, Penguin Random House has an enterprise value of $3.55 billion and a list of authors including John Grisham, Arundhati Roy and Paulo Coelho.
Bertelsmann CEO Thomas Rabe said the company had achieved its goal of securing a 75 percent majority holding, with Pearson pledging to retain its 25 percent stake for at least 18 months.
As part of the deal, Pearson will receive $968 million plus future dividends including a payout of $66 million in April 2018. The two shareholders will take further dividends in future by increasing the book publisher's leverage to two times net debt to core earnings.
Analysts said Pearson had extracted a good price without overly diluting its future earnings. However the sale did not change the underlying pressures facing the group's sprawling education business.
Employing 35,000, Pearson provides everything from textbooks to school testing, college courses and online degrees around the world. Having grown rapidly for years, it started to lose its way in 2015 when the U.S. economy recovered, encouraging more people to take jobs rather than go into higher education.
Since then, students have moved to ditch expensive text books for second-hand copies and digital services, hammering Pearson's income and forcing it to cut costs across the business after it reported five profit warnings in four years.
"This is the last piece of the family silver to be sold off, after the FT and the Economist, so there's not much scope for Pearson management to pull any more rabbits out of the hat," said Roddy Davidson, media analyst at Shore Capital.
Pearson's shares, down 30 percent in the last year, fell a further 6 percent after the company suggested its future dividend would be in the mid-teens, below market expectations of nearer 27 pence.
"Since this would give just over a 2 percent dividend yield, that is likely to mean the stock loses its appeal to income funds, which had held it because of its formal dividend yield (from 2016)," said Liberum analyst Ian Whittaker, a long-time critic of the company with a "sell" rating on the stock.
"That could put pressure on the stock moving forwards."
($1 = 0.7768 pounds) (Additional reporting by Helen Reid in London and Georgina Prodhan in Frankfurt; Editing by James Davey and Mark Potter)