June 27 (Bloomberg) -- Best Buy Co., the largest U.S. consumer-electronics chain, will repurchase as much as $5.5 billion in stock and plans to open 400 additional stores.

The company also said today before a shareholders' meeting that it intends to raise the quarterly dividend by 30 percent to 13 cents a share. The shares gained the most in eight months.

Best Buy June 19 that first-quarter profit declined more than analysts estimated and also lowered its annual forecast. The company is headed toward the smallest annual sales growth in at least nine years, as higher fuel prices and falling home prices cut into consumer spending.

``Best Buy wants the market to know that it plans to continue to aggressively grow, while it more effectively returns capital to shareholders,'' Brian Nagel, an analyst with UBS Securities LLC, said in a note today. He rates the stock ``buy.''

The company intends to add 400 U.S. locations, increasing its total namesake stores in the country to 1,400 from an earlier estimate of 1,000. It has 852 now. Best Buy didn't provide a timeline for the expansion.

The company will buy back $3 billion in shares by February, funding the repurchase with cash, investments and loans. The plan would represent about 25 percent of its outstanding shares if the total amount was bought at today's closing price of $46.67. Best Buy's stock-market value is about $22.4 billion.

``We're not happy with our stock price,'' Chief Financial Officer Darren Jackson said during the investors meeting at the company's Richfield, Minnesota, headquarters.

Rival Locations

Best Buy's stock has fallen 5.1 percent in 2007 after gains in the last four years. Rival Circuit City Stores Inc. shares dropped 20 percent this year.

Circuit City anticipates opening as many as 65 new locations this year, about twice as many as last year. It has more than 650 U.S. stores now.

Best Buy said the buyback should have a ``modest benefit'' on earnings per share. The retailer last week lowered its profit forecast for the year to as much as $3.15 a share, from an earlier estimate of at most $3.25.

The buyback program replaces a $1.5 billion plan announced last June. The timing of purchasing the remaining $2.5 billion in stock will depend on market conditions, the company said.

Shares of Best Buy climbed $1.68, or 3.7 percent, to $46.67 at 4:02 p.m. in New York Stock Exchange composite trading, the biggest gain since October 2006. Circuit City stock slipped 17 cents, or 1.1 percent, to $15.22.

Best Buy said it intends to pay the dividend on Oct. 30 to shareholders of record as of Oct. 9. The company had its first cash dividend in 2003 and increased it each year since then. It raised the payout 25 percent last year.

The company also has 47 namesake and 122 Future Shop stores in Canada.

To contact the reporter on this story: Mark Clothier in Atlanta at mclothier@bloomberg.net; Josh Fineman in New York at jfineman@bloomberg.net

Last Updated: June 27, 2007 17:22 EDT