UPDATE 1-PSA Peugeot Citroen hits medium-term goals early

* Peugeot delivers 5 pct automotive division margin in 2015

* Goals reached ahead of time on Europe recovery, cuts

* Pays no dividend for 2015 to resume payouts for FY 2016 (Adds detail, background)

PARIS, Feb 24 (Reuters) - PSA Peugeot Citroen said on Wednesday it would consider paying a dividend for 2016 after reaching its medium-term targets ahead of schedule, helped by cost cuts, price increases and a recovery in European demand.

The French carmaker said its automotive division hit a 5 percent operating margin, a goal it had set for 2019-23, as a turnaround plan engineered by Chief Executive Carlos Tavares gained traction in the aftermath of a 3 billion euro ($3.3 billion) bailout in 2012.

“I am delighted with this collective success. It puts our company back in the race and proves its potential,” Tavares said in a statement accompanying Peugeot’s full-year results.

The company posted a full-year net profit of 1.2 billion euros, reversing a 555 million loss in 2014. Group recurring operating income more than tripled to 2.7 billion.

Tavares overhauled Peugeot in the wake of the bailout which saw the French government and China’s Dongfeng each buy 14 percent stakes. Tavares, who defected from Renault, where he was second-in-command, pledged to cut labour costs, inventory and model line-ups to restore profitability. . On Wednesday, Peugeot said its group operational cash flow had reached 3.8 billion euros, beating a 2 billion target for 2015-17, on the back of improved demand in Europe where the market saw car sales rise 9.2 percent last year. .

The company surpassed its medium-term recovery goals of reaching a 2 percent auto division margin and 2 billion euros of cumulative cash flow by 2018.

PSA said it would not pay a dividend for 2015 but that a dividend policy “in line with sector practices” would be proposed from the 2016 financial year.

$1 = 0.9083 euros Reporting by James Regan; Editing by Edward Taylor and Mark Potter