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* Suspends share buyback, stock ends down 4.6 pct
* Cuts investments 17 pct in 2015-2018 to 48 billion euros
* Targets annual output growth of 3.5 percent (Adds fund manager, details, shares)
By Stephen Jewkes and Ron Bousso
MILAN/LONDON, March 13 (Reuters) - Italy's Eni cutits dividend and suspended a share buyback programme on Friday,becoming the first oil major to reduce payouts after a steep oilprice decline in a bid to save funds to spur future productiongrowth.
In the first major business plan of Chief Executive ClaudioDescalzi, Italy's biggest listed company said it would pay a2015 dividend of 0.8 euros per share, compared with the 1.12euros per share it paid on 2014 results.
The state-controlled oil major also said it would cutinvestments by 17 percent in the 2015-2018 period to around 48billion euros ($50 billion) and sell assets worth 8 billioneuros, 70 percent of which will be put up for sale before 2016.
Eni shares fell more than 6 percent before recouping some ofthose losses and ending down 4.6 percent.
"Everyone was convinced they'd do all they could to keep thedividend steady," said Roberto Lotici, fund manager at Ifigest."The capex cuts and intensity of the assets sales are also acause for concern," he added.
The slump in oil prices since June is testing theability of listed oil companies to support cash flows and hassparked a rush to cut costs across the sector.
Many big oil firms have announced cuts of 10 to 15 percentto their spending budgets and some have suspended sharebuybacks.
But most consider high dividends as sacrosanct and investorshave said the payouts are the main factor supporting the stocksof major oil firms.
Oil prices collapsed to as low as $46 per barrel in Januaryfrom peaks last year of $115. Prices have recovered somewhatsince January and Brent crude was trading at $56 per barrel onFriday.
Companies like BP and Shell said they woulddo their utmost to continue paying high dividends and wouldrather cut operating and capital expenditure (capex), sellassets and increase borrowing than reduce payouts.
TARGETS OUTPUT GROWTH
When asked in January if Eni would cut dividends, Descalzitold Reuters in January he was confident the company would beable to navigate the low oil price environment.
Until now, Eni has had a dividend yield of 6.8 percentversus a peer mean of 5.4 pct, raising concern it had become toostretched in a low oil-price world as the group restructures andsells businesses.
The company, which under Descalzi is increasingly shiftingits focus to upstream exploration and production activity, saidit was targeting annual output growth of 3.5 percent in2015-2018, up from the 3 percent growth in its previous2014-2017 plan.
Growth will be boosted by the start-up of 16 major projects,which will have an average breakeven level of $45 per barrel, itsaid.
Eni, the biggest foreign oil producer in Africa in terms ofproduction, is seeking to expand its geographical footprint.
"We're transforming the company. I am happy but we need tomake more effort to be in other countries. We're working onthat," Descalzi said.
The company is going through a high investment cycle, unlikesome of its peers, meaning it needs an oil price of $120 perbarrel to break even - or generate cash after capex, operatingexpenditure and dividend payments.
By comparison, its rivals ExxonMobil and Shell needa price of around $60 to break even.
($1 = 0.9498 euros)
(Additional reporting by Agnieszka Flak, Giancarlo Navach andDmitry Zhdannikov; Editing by Susan Thomas and Pravin Char)
