Time Warner Inc posted better-than-expected quarterly profit on Wednesday helped by its cable networks and the last installment of its Harry Potter movie franchise.

Shares rose 2.6 percent in early trading on share buybacks, a better-than-forecast profit outlook and an increase in its quarterly dividend.

Time Warner, like other media conglomerates, are relying on strong performances at its cable networks to increase cash flow. Walt Disney Co on Tuesday said its media networks unit was boosted by its cable business and Viacom Inc last week also highlighted its strong cable performance.

Subscription fees at its cable networks including HBO rose 5 percent to $3.5 billion driven mainly by a 5 percent increase in carriage fees paid by cable and satellite distributors.

But cable network advertising was up just 2 percent, with growth benefiting from international operations.

Advertising revenue at its Time Inc magazine publishing business was flat during the quarter but total revenue was down 1 percent to $1 billion.

Warner Bros revenues rose 7 percent to $3.9 billion, due mainly to stronger home entertainment, video games and new subscription video-on-demand deals with companies like Netflix Inc and others.

Our concern is whether they'll have the ability to grow margins this year, said Collins Stewart analyst Thomas Eagan. They'll likely drive higher ratings with the programming they're buying but will advertising revenue grow enough to expand the margin?

Net profit rose to $773 million, or 76 cents a share, in the fourth quarter compared with $769 million, or 68 cents a share, a year ago.

On an adjusted basis, net income was 94 cents a share, ahead of average analysts' forecast of 87 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 5 percent to $8.2 billion.

The New York-based company forecast its full-year percentage growth rate in adjusted diluted net income per share to be in the low double digits from a base of $2.89 in 2011. At the low end that would translate to a forecast of $3.18 a share. That was ahead of analysts' average forecasts of $3.16.

Time Warner also raised its quarterly cash dividend by 11 percent to $0.26 and announced a new $4 billion stock repurchase authorization by its board.

Miller Tabak analyst David Joyce said the company's capital allocation strategy was a positive for investors.

Time Warner shares rose 99 cents to $39.09 in early trading on the New York Stock Exchange.

(Reporting By Yinka Adegoke, editing by Dave Zimmerman and Derek Caney)