Vodafone increased its dividend for the first time in seven years and said it would hit the upper end of its profit and cash flow guidance as the telecoms group was boosted by a return to service revenue growth in Germany, its largest market.

Shares closed more than 8 per cent higher on Tuesday after the FTSE 100 company said it would increase its dividend by 2.5 per cent by the end of the current financial year, as well as move towards a “progressive dividend policy”. It aimed to continue increasing returns to shareholders annually, according to a person familiar with the matter.

The results are a boost for Vodafone after a multiyear transformation under chief executive Margherita Della Valle, which saw the group sell its Italian and Spanish operations and complete a ￡16.5bn merger of its UK operations with Three.