UPDATE 1-Capstead Mortgage raises Q1 dividend; shares up

* Raises quarterly dividend to $0.56

* Sees greater demand for residential-mortgage securities

* Says short-term borrowing rates fell considerably

March 12 (Reuters) - Capstead Mortgage Corp (CMO.N) raised its quarterly dividend and said recent government actions have led to greater demand and higher prices for its residential-mortgage securities, sending its shares up 6 percent.

The real-estate investment trust raised its first-quarter dividend to 56 cents a share from 36 cents a share declared in the December quarter.

In December, Capstead had reduced its dividend to 36 cents from 55 cents.

"As anticipated, interest rates on our short-term borrowings have declined considerably since the first of the year resulting in a pronounced expansion in our financing spreads and net interest margins," Chief Executive Andrew Jacobs said in a statement.

The company also said greater demand and higher prices for residential-mortgage securities resulted in improved book value and led to availability of financing for its portfolio.

Shares of the company were trading at $11.45 after the bell. They closed at $10.77 Thursday on the New York Stock Exchange. (Reporting by Supantha Mukherjee in Bangalore; editing by Vinu Pilakkot)