LONDON, Nov 11 (Reuters) - Vodafone's shareholders will be rewarded with the first dividend increase in eight years after a return to growth in Germany helped the European mobile and broadband operator upgrade its earnings outlook.

US -listed shares of the company rose 2.6% in premarket trading, after it reported on Tuesday a 5.9% rise in first-half adjusted earnings to 5.73 billion euros ($6.68 billion).

The group slashed its dividend by 40% in May 2019 after the cost of buying 5G spectrum caused its debt to balloon.

Chief Executive Margherita Della Valle has reshaped Vodafone since she took over in January 2023, merging with rival Three in Britain to become the market leader and exiting tough markets in Spain and Italy.

It is now the biggest or one of the biggest players in each of its markets and it has a growth strategy that underpins its medium-term outlook to increase free cash flow.

"It's been a long time since this happened in Vodafone and we are pleased that we are able to share this with our investors," Della Valle told reporters on Tuesday.

She said a new progressive dividend policy would deliver an expected increase of 2.5% in the year to the end of March 2026.

RETURN TO GROWTH IN GERMANY

Vodafone returned to growth in Germany in the second quarter after the impact of a 2024 change in TV subscription rules ended.

It also said it had made a fast start in bringing together the Vodafone and Three networks in Britain.

"In the second quarter, we saw service revenue accelerating, with good performances in the UK, Turkey and Africa, and a return to top-line growth in Germany," Della Valle said.

The company expects to be at the "upper end" of its full-year forecasts for adjusted core earnings of 11.3-11.6 billion euros and group adjusted free cash flow of 2.4-2.6 billion euros.

($1 = 0.8575 euros)