UPDATE 1-Dr Who toymaker expects strong Xmas, ups dividend

* Character Group targets 5-6 pct market share, from 4 pct

* Four-fold increase in FY dividend to 4 pence

* Sales up 24 percent to 85.2 mln stg

* Profit before tax 7.6 mln stg versus loss in 2009

(Adds detail, CEO comment, share price reaction)

By Una Galani

LONDON, Dec 2 (Reuters) - British toymaker Character Group CCT.L announced a four-fold increase in its full-year dividend and forecast strong trading over the Christmas period will help lift its overall market share.

The licensee for brands including Doctor Who, ZhuZhu Pets, Peppa Pig and Fireman Sam aims to increase its share of the UK market which accounts for the bulk of its sales to between 5 and 6 percent next year, up from current levels of around 4 percent, finance director Kiran Shah told Reuters on Thursday.

“We expect to perform very well this Christmas, our sales so far are better than last year. This is mainly down to our good product range. We expect the Doctor Who, ZhuZhu and Armed Forces Collection brands to be our best-sellers”, said Shah who added the performance of the overall toy market may not be as strong.

Character, which competes in the UK market with U.S. rival Mattel Inc MAT.O and Danish toymaker Lego Group, reported profit before tax of 7.6 million pounds ($11.9 million) for the year through to August, after a loss of 2.2 million pounds last year following the collapse of Woolworths in 2008.

Large supermarkets have since replaced the sales the company made to Woolworths enabling Character to announce a four-fold increase in its dividend for the full year to 4 pence per share, with a final dividend of 2 pence.

Shah said he was confident the group, which is expected to unveil further additions to its product range early next year, could maintain a progressive pay out policy despite warning investors that higher raw materials and freight charges were likely to weigh on margins in the short term.

Shares in Character rose 2.3 percent to 175 pence by 0847 GMT. (Reporting by Una Galani; Editing by Mark Potter)