* Sees 2015 revenue up more than 7 percent
* 2014 net profit 3 bln euros vs 3.18 bln in Reuters poll
* To pay 0.75 euro per share dividend in 2015, 2016
* Devaluation of Venezuelan bolivar hurts profits (Adds investor comment, detail, updates shares)
By Sonya Dowsett and Andrés González
MADRID, Feb 25 (Reuters) - Spain's Telefonica gave upbeat sales growth forecasts on Wednesday after the devaluation of the bolivar hit its Venezuelan business badly last year and helped knock more than a third off net profit.
Europe's third biggest telecoms company by market value and revenue said it expected sales to grow more than 7 percent this year and more than 5 percent in 2016.
The company said it would pay a 0.75 euro dividend in each of the next two years and cancel share capital, helping maintain one of the highest dividend yields in the sector at 5.4 percent, according to Thomson Reuters data.
Europe's major telecom companies have begun to turn a corner after years of intense regulatory pressure, recession and competition that all hit the top line.
Telefonica shares rose 1.7 percent, outpacing a steady Spanish blue-chip market and the European telecoms index , partly thanks to signs of an improvement in its key Spanish market.
"The restoration of a cash dividend is to be welcomed and they've indicated that they will probably resume ongoing buybacks, so that's all good news, as a shareholder," said Stan Pearson, head of European Equities at Standard Life Investments.
"There's operational improvement coming through in Germany, but Spain, where they've done a lot in a difficult environment, is where we really need to see some economic recovery."
Seeking to cut debt and focus on core markets in Spain, Germany and Brazil, Telefonica has sold subsidiaries in Ireland and the Czech Republic and agreed last month to sell its British O2 business to Hutchison Whampoa for up to 10.25 billion pounds ($15.9 billion).
For 2014, Telefonica reported a 35 percent fall in annual net profit to 3.0 billion euros ($3.4 billion), below an average forecast of 3.18 billion in a Reuters poll.
Telefonica warned last week that the devaluation of the Venezuelan bolivar would knock 399 million euros off net profit. Ford Motor Co, PepsiCo and tissue maker Kimberly Clark have also taken a hit this year on the plunge in the Latin American country's currency.
Revenue stabilised in Telefonica's key home market, where it has been trying to win back cash-strapped consumers with bundled packages of mobile, fixed-line broadband and TV services after investing heavily in faster networks.
Telefonica said the annual sales decline halved during the year in Spain, which emerged from recession in 2013, and that it expected revenue to rise this year.
Pending regulatory approval, cash from the O2 sale will help Telefonica cut its debt to about 35 billion euros, according to analysts' estimates. The company said on Wednesday it expected the deal to close in the first half of 2016.
Telefonica said it was aiming to reduce the ratio of net debt to operating income to 2.35 in 2015 from 2.74 at end 2014. The 2014 ratio does not include proceeds from the O2 sale.
Net debt was 45.1 billion euros at the end of December, above a 43 billion euro target due to the weaker bolivar. The firm said it would raise 3 billion euros through a rights issue in connection with the purchase of Vivendi's Brazil unit GVT, less than the 3.4 billion euros expected.
($1 = 0.8793 euros)
$1 = 0.6450 pounds Additional reporting by Simon Jessop in London; editing by Paul Day and David Clarke