Modular kitchen maker Howden Joinery Group is reaping the benefits of a strong UK housing market.

The company raised its dividend and said it would spend £70 million to buy back its own shares over the next two years.

Howden's shares rose as much as 4.7 per cent in early trading on Thursday, making the stock the top percentage gainer on the FTSE-250 Midcap Index.

A recovery in the UK economy and record-low interest rates encouraged many Britons to buy houses last year, although demand has been slowing recently due to tougher mortgage rules that limit access to cheap cash and the approaching general election.

Howden, which sells kitchens and joinery products used by landlords, local authorities, housing trusts and developers, reported a 40 percent rise in full-year profit.

"The board has reviewed the cash balances in light of the group's future investment opportunities, expected peak working capital requirements and trading outlook," the company said, explaining its decision to raise the dividend and buy back shares.

The company raised its annual dividend to 8.4 pence per share from 5.5 pence.

Howden's pre-tax profit rose to £188.8m in the year ended December 31, from £135m a year earlier. Revenue rose 14 per cent to £1.09 billion.

Howden had foreshadowed in January that its pre-tax profit would be better than the average market estimate. The company also raised its forecast in November.