(Reuters) - British chipmaker CSR Plc underscored its financial strength on Monday with a share buyback of up to $50 million, helping send its shares up more than 20 percent to their highest in six months.

The company, whose chips feature in the popular Beats by Dr Dre headphones, also said it would raise its final dividend to 7.1 cents per share from 6.5 to give a total payout for the year of 1.03, having stacked up $278 million in cash or cash equivalents by the end of 2011.

The Cambridge, eastern England-based group said it had boosted its gross margin in the fourth quarter as its focus on platforms such as audio start to pay off. It halted the development of technology for digital TVs and silicon tuners in December to focus on higher-margin areas.

Shares in the group were up 21 percent at 274.4 pence by 1109 GMT, making them the top performers in the FTSE 250 mid-cap stock index, having risen to a six-month high of 275.5p.

Chief Executive Joep van Beurden said the group, which competes with Broadcom and Qualcomm, was seeing good momentum in voice and music technology, as well as location, automotive and low-energy bluetooth systems against a weak backdrop for consumer technology.

Customers are still cautious but the situation today, against Q3 and Q4, is a touch better, van Beurden said. Underlying demand has stabilized.

CSR, which had fallen behind competitors in the hot smartphone market because of its lack of a wifi-bluetooth combination chip, said it plans to enter the market with its own chip. Van Beurden said revenue would ramp from 2013, which is up to six months later than the group had previously forecast.

Analysts at brokerage Liberum, who have a buy rating on the stock, said the results were ahead of expectations and noted the buyback and that guidance was slightly ahead.

CSR made an underlying operating loss of $4.9 million after tax in the fourth quarter against a $12.5 million profit a year ago, reflecting restructuring costs and the integration of Zoran, the imaging technology group it bought last year.

Revenue rose to $244 million, towards the top of the $230 million to $250 million range it had forecast and up from $184.8 million a year ago, while its gross margin improved to 51 percent from 48.7 percent.

The company also said it would deliver $130 million of annual cost savings by the end of the second quarter. It said revenue for the first quarter of 2012 would be in a range between $205 million and $225 million.