Feb. 14 (Bloomberg) -- Comcast Corp., the cable-television company pressured by investors to boost returns, said it will buy back $6.9 billion of its stock over two years and pay its first dividend in almost a decade, sending the shares up the most since 2002.

Fourth-quarter net income rose 54 percent to $602 million, or 20 cents a share, from $390 million, or 13 cents, a year earlier, Philadelphia-based Comcast said today in a statement. Profit beat the 17-cent average of 17 analysts' estimates compiled by Bloomberg. Sales gained 14 percent to $8.01 billion.

Chieftain Capital Management Inc. and Becker Capital Management Inc. were among shareholders who demanded Chief Executive Officer Brian Roberts curb spending to free up cash and reward investors after a 35 percent drop in the stock last year. Roberts said today Comcast isn't considering bids for Yahoo! Inc. or Sprint Nextel Corp., and announced an annual dividend of 25 cents a share that he said may increase over time.

``They certainly hit on all the important points, which we and others had been discussing with them,'' said Glenn Greenberg, managing director of Chieftain Capital. ``Now it's up to them to create value, which they have not done in the past 10 years.''

Greenberg said in an interview today that New York-based Chieftain isn't buying or selling any of its 60.5 million Comcast shares.

Comcast rose $1.43, or 8 percent, to $19.24 at 4 p.m. New York time in Nasdaq Stock Market trading, the most since Oct. 16. 2002.

Investor Demands

Comcast, which is paying its first dividend since 1999, made more than 20 acquisitions in six years to become the biggest U.S. cable-TV operator. That led investors to criticize the industry for spending too much on purchases and network improvements to fuel growth. Cablevision Systems Corp., the only other major cable company to pay a recent dividend, delivered a $3 billion special payout in 2006, benefiting the founding Dolan family.

``Obviously they realized they have major shareholders who would like a dividend, who would like a stock buyback, and they're providing both,'' said Jean-Marie Eveillard, manager of the $22 billion First Eagle Global Fund. He said he plans to hold onto his 10.2 million Comcast shares after today's announcement.

Eveillard buys stocks he deems inexpensive relative to potential earnings and sales growth. Investors with styles similar to First Eagle, including Wellington Management Co. and Dodge & Cox, bought Comcast stock in the second half of last year, according to regulatory filings.

Forecast

This year, Comcast projects sales and operating cash flow will increase 8 percent to 10 percent. Capital expenditures should account for 18 percent of sales this year, compared with 20 percent in 2007, Comcast said. Cable capital expenditures increased 29 percent to $6 billion in 2007.

In 2008, free cash flow is projected to rise at least 20 percent from its level of $2.3 billion in 2007, Comcast said.

In the fourth quarter, Comcast lost 94,000 basic video subscribers amid a slowing economy and a sagging housing market. In December, the company cut its full-year 2007 forecast because of declining home sales and competition from telephone and satellite TV companies.

The company added 523,000 digital video customers and 604,000 digital telephone subscribers. Sanford C. Bernstein & Co. analyst Craig Moffett had projected gains of 333,000 digital video subscribers and 694,000 digital telephone subscribers. In last year's fourth quarter, Comcast signed up 614,000 digital video subscribers and 510,000 digital voice customers.

Dividend Yield

Roberts said today the dividend of 6.25 cents a share per quarter will equal about $750 million a year. Based on yesterday's closing price, it translates into an indicated yield of 1.4 percent.

Under the buyback, the company could repurchase 13 percent of its common stock, based on yesterday's closing price. The company previously hadn't given a time frame. Comcast spent $1.25 billion on its shares last quarter, after repurchasing $9.2 billion dating back to December 2003.

The repurchases and dividend may persuade investors that Comcast will use its cash to reward shareholders rather than seek acquisitions, Moffett said in a note today.

Chieftain in a Jan. 14 letter to Comcast cited ``wasteful spending on non-core acquisitions.'' Pat Becker Jr. of Portland, Oregon-based Becker Capital Management, which owns 1.2 million shares, said investors were looking for greater free cash flow, and feared Comcast might consider acquiring Sprint.

Roberts today said he wanted to meet such concerns ``head- on.''

``We are committed to remain disciplined in our approach to acquisitions,'' Roberts said on a conference call. ``We are not spending any time on any of the large transformative acquisitions that have been speculated about, like Yahoo or Sprint.'' Yahoo is seeking suitors after an unsolicited bid from Microsoft Corp.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

Last Updated: February 14, 2008 16:16 EST