UPDATE 3-Time Warner Cable profit jumps, raises dividend

* Q4 EPS $1.09 vs 91 cents year-ago

* Adds 94,000 Internet subscribers

* Loses 141,000 basic video subscribers

* Raises quarterly dividend 20 percent

* Shares up 2.3 pct (Adds CEO, analyst, byline)

By Yinka Adegoke

NEW YORK, Jan 27 (Reuters) - Time Warner Cable Inc (TWC.N) posted a 22 percent rise in quarterly profit as it added more Internet customers and raised its dividend 20 percent.

The No. 2 U.S. cable television operator's profit growth and increasing return of cash to shareholders was offset with its continuing loss of TV customers during the quarter.

Like other cable companies, it faces growing competition for video customers from phone and satellite providers as well as Internet-based newcomers like Netflix Inc (NFLX.O) and Hulu.

Time Warner Cable Chief Executive Glenn Britt said on Thursday most video customer losses were due to the slow economy and weak housing market. Like other cable executives, he raised doubts as to the sustainability of Netflix's business model.

"They have a wonderful (online) interface, which anybody can hire a bunch of Web designers and do that. I question what the ultimate root value of that is, what's the value-add of what they're doing," Britt said on a conference call with analysts.

But Netflix has grown at an exponential rate in recent years and now has more than 20 million subscribers, compared with Time Warner Cable's 12.5 million video subscribers.

Time Warner Cable added 94,000 residential and commercial Internet customers and 72,000 phone customers in the quarter. Analysts at Kaufman Bros had forecast it would add 100,000 new Internet subscribers and 35,000 phone customers.

But the New York-based company lost 141,000 basic video subscribers. Kaufman had forecast losses of 122,000 basic video customers.

Fourth-quarter net profit rose to $392 million, or $1.09 a share, compared with $322 million, or 91 cents a share, a year earlier. Revenue rose 6 percent to $4.80 billion.

Free cash flow rose 58 percent in the quarter to $665 million.

The increasing amount of cash generated by the business and its stable capital spending allowed Time Warner Cable to increase its quarterly dividend 20 percent to 48 cents, or $1.92 a year.

Chief Operating Officer Rob Marcus told analysts the company expects to again see double-digit percentage growth in operating profits and free cash flow for the full-year of 2011.

"The company seems very upbeat and confident about their future financial performance," said Collins Stewart analyst Thomas Eagan. "The dividend increases were expected but not necessarily this quarter."

Time Warner Cable's shares have risen nearly 60 percent in the last 12 months as investors have been pleased with the company's focus on cable distribution rather than diversifying to own media businesses like Comcast Corp's (CMCSA.O) acquisition of NBC Universal. Investors have also welcomed the cable company's larger-than-expected share buy-back announced late last year.

The company's shares rose 2.3 percent, or $1.54, to $69.62 in early New York Stock Exchange trading.

For the alerts, click on [ID:nASA01G02] (Reporting by Yinka Adegoke; Saqib Iqbal Ahmed in Bangalore; Editing by Maureen Bavdek)