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* Ups dividend to 9.75 cents from 9.5 cents per share
* Q1 profit $3.2 bln vs $3.1 bln consensus forecast
* Rosneft contribution down 75 pct vs. Q4 2013
* Shares up 0.8 pct (Adds analyst comment, share price)
By Sarah Young and Karolin Schaps
LONDON, April 29 (Reuters) - BP raised its quarterlydividend for the second time in six months and said more sharebuy-backs were on the cards, showing how the British oilcompany's asset sales are providing more cash for investors.
Shareholders have urged big oil companies such as BP andShell to control spending and give back more cashbecause of concerns over rising costs in the oil and gasindustry and their impact on profitability.
"As well as progressive growth in the dividend per share, weexpect to use surplus cash to support further distributionsthrough share buy-backs or other mechanisms," Chief ExecutiveBob Dudley said in a statement.
BP on Tuesday reported a 24 percent drop in first-quarterunderlying replacement cost profit to $3.2 billion, slightlyahead of a consensus forecast of $3.1 billion.
The profit fall reflected weaker refining margins and lowerproduction as the company has shed assets to raise funds forshareholder payouts. The group also wrote off $521 millionrelated to its decision not to proceed with a shale project inthe Utica basin in the United States.
Profits were also hit by a drop in the contribution fromBP's stake in Russian oil company Rosneft.
BP, the largest foreign investor in Russia through itsnearly 20 percent stake in the Kremlin's state oil champion, hassaid repeatedly that it will stand by its investments in Russiasince Moscow's intervention in Ukraine.
BP said this week it was considering what U.S. sanctionsagainst Rosneft head Igor Sechin, would mean for its business.
The share of profits BP generated from Rosneft shrank by 75percent in the quarter for two reasons - the weakening rouble asRussia's economy comes under pressure from the standoff with theWest over Ukraine, plus the absence of a tax charge boost in theprevious period.
Russian production made up about a third of BP's output inthe first quarter.
Cash flow came in at $8.2 billion, more than double theamount from the same period last year.
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BP, Europe's third biggest oil company by marketcapitalisation, will raise its quarterly dividend to 9.75 centsper share, to be paid in June, 8.3 percent higher than a yearearlier. This is also above the 9.5 cents announced in Octoberand paid for the subsequent two quarters.
The group's dividends are returning towards levels last seenin 2009 before the Gulf of Mexico oil spill in 2010, after which dividends were suspended for three quarters.
Before the Gulf spill, BP had paid a dividend of 14 cents.
"Overall I think it's a solid set of results which holds outthe hope that BP can sustain increased distributions goingforward," Liberum analyst Andrew Whittock said. He also said hewas cautious over Russia but it was currently unclear howsanctions might impact BP.
BP's shares were up 0.8 percent to 492.6 pence by 0936 GMT.
The higher payouts will be partially funded by the company'sasset sales. By the end of 2015, it has said it will sell $10billion worth of assets, in addition to the $40 billion worth ofdisposals made to help pay for the 2010 Gulf of Mexico oilspill.
To date it has offloaded $3 billion worth, including fouroilfields in Alaska earlier in April. Disclosing the price onTuesday, BP said these were sold for up to $1.5 billion.
The company, still overshadowed by litigation related to the2010 spill, said provisions to cover its clean-up, fines,compensation and legal costs had not risen in the quarter andremained at $42.7 billion. In March, BP won 24 new leases in theGulf of Mexico, with the company saying on Tuesday that finalawards subject to regulatory approval.
In the United States, BP said in March that it wouldseparate its U.S. shale assets into a new wholly-owned businessto try to improve its competitiveness. Disappointing appraisalresults in Utica meant it would take a $521 million write-off onthat project.
Norwegian oil firm Statoil also reportedfirst-quarter earnings above expectations on Tuesday, whileItaly's ENI's profits were in line.
Royal Dutch Shell and France's Total areboth due to report first quarter results later this week.
(Reporting by Sarah Young, additional reporting by KarolinSchaps; editing by Kate Holton and Jane Merriman)
