UPDATE 1-E.ON leads European shares higher as investors await U.S. inflation data


* STOXX 600 up 0.2 pct

* Dividend hike sends E.ON up 6 pct

* Iliad tumbles 6 pct on disappointing fixed-line numbers

* Dealmaking in Europe not yet at "reckless expansion" stage (Adds quotes, details, updates prices)

LONDON, March 13 (Reuters) - European shares edged higher in muted trading on Tuesday as investors awaited the latest inflation figures from the United States, while results drove big moves in Iliad and E.ON.

French telecoms company Iliad fell 6 percent even as it reported higher annual sales and profits for 2017, with traders pointing to flat fixed-line revenues in the final quarter.

It comes as Orange, Iliad rival and dominant French telecoms company, returned to growth last year for the first time since 2009 after spending heavily to roll out high-speed broadband.

The pan-European STOXX 600 gained 0.2 percent, with utilities a top-performing sector for a second day on plans by German utilities RWE and E.ON to divide up the assets of power utility Innogy.

E.ON got a further boost to the top of the STOXX 600 on Tuesday, its shares gaining 4.4 percent after its results. The company said it would raise its dividends for 2018 and 2019.

M&A deals have multiplied in the European market recently, but investors said dealmaking was not at feverpitch.

"One thing I am very pleased not to see is the over-arching cross-industry deals which marked the apex of ambition in the early noughties," said Kevin Gardiner, global investment strategist at Rothschild Wealth Management.

"That sort of reckless expansion and combination seems to be missing from the data, which suggests there is room for further growth," he added.

Other notable gainers included Swedish debt collector Intrum Justitia rose 6.2 percent to the top of the STOXX, with traders pointing to a note from SEB upgrading the stock to 'hold' from 'sell'.

Traders said the strong price gains on the note were likely down to investors covering short positions on the stock which is down 10 percent so far this year.

Oil stocks were also strong boosts. Total gained 1.4 percent after Barclays upgraded its rating on it, saying the French oil major is entering a new phase of growth in cashflow and production.

Struggling South African retailer Steinhoff saw its Germany-listed shares rise 2.9 percent after it cut its stake in KAP Industrial as it tried to plug a liquidity gap.

A weaker full-year outlook sent chemicals group Wacker Chemie down 4.1 percent. The firm said sales would slow due to currency pressures.

Veolia fell 2.4 percent, the top faller on France's CAC 40, after the Qatari government sold its 4.6 percent stake in the utility group.

Overall European company results have been encouraging. Investors said European earnings had further room to grow as they were still lagging the U.S..

"The European market isn't pricing in quite as much as the U.S. is, and it's in a more favourable part of the business cycle," said Rothschild's Gardiner.

"We are aware that it's a pretty crowded story, but we still think it's very attractive," he added.

(Reporting by Helen Reid Editing by Tom Pfeiffer and Raissa Kasolowsky)