By Joachim Dagenborg and Ole Petter Skonnord
OSLO, Feb 16 (Reuters) - Aluminium producer Norsk Hydro proposed a higher-than-expected annual dividend on Friday thanks to stronger aluminium and alumina prices that boosted performance across its most important divisions, sending its shares up.
The Norwegian company raised its 2017 dividend to 1.75 Norwegian crowns ($0.2266) per share, above expectations for 1.48 crowns in a Reuters poll of analysts and up from 1.25 crowns for 2016.
"I am pleased with the strong, full-year and quarterly results, supported by higher aluminium and alumina prices," CEO Svein Richard Brandtzaeg said in a statement.
Earnings at the firm's two most important divisions were above forecast. Bauxite and alumina posted an underlying operating result of 1.9 billion crowns, beating expectations for 1.6 billion, while primary metal earned 1.37 billion crowns, against expectations for 1.34 billion.
"Unlike its peers who reported recently, this is a good report," said Credit Suisse International analyst James Gurry.
Both Alcoa and Aluminum Corp of China, reported fourth-quarter results below expectations last month.
Norsk Hydro's underlying earnings before interest and taxes rose 94 percent year-on-year to 3.56 billion crowns, slightly behind the 3.79 billion crowns expected in the poll, due to one-off costs related to its integration of aluminium firm Sapa.
It bought the 50 percent of Sapa it did not already own in a $3.2 billion deal in July.
The company reiterated it expected global aluminium demand to rise 4 percent to 5 percent in 2018 and said that the market was expected to be largely balanced.
Hydro's shares traded 2.9 percent higher at 0843 GMT, making it the ninth best performer in the pan-European STOXX 600 index.
$1 = 7.7222 Norwegian crowns Writing by Gwladys Fouche; Editing by Edmund Blair