* FTSE 100 index rises 0.4 percent

* BSkyB top gainer after positive update

* Lloyds up as strengthens dividend case

By Atul Prakash

LONDON, May 1 (Reuters) – Britain’s top share index advanced for a fourth straight session to set a two-month high on Thursday, with encouraging reports from companies such as BSkyB and Lloyds improving sentiment.

British pay-TV operator BSkyB climbed 3.9 percent, the biggest gainer on the blue-chip FTSE 100 index, after saying it added 74,000 net new TV customers in its third quarter, more than double the growth it recorded last year.

Lloyds Banking Group, which is 25 percent-owned by the government, was up 3.6 percent as its pretax profit jumped 22 percent in the first quarter following lower costs and better margins. The bank also said it would apply to the central bank in the second half to restart dividend payouts.

“The market is certainly getting help from positive news from several companies, with Lloyds results broadly reflecting a growth in the economy,” Keith Bowman, equity analyst at Hargreaves Lansdown (LSE: HL.L – news) , said.

“Investors are focusing again on economic fundamentals, particularly in the United States, where economic recovery broadly remains on track. The UK economy is also moving in the right direction.”

Lloyds helped the UK banking index to gain 1.5 percent, the biggest sectoral gainer in Britain, and added the most points to the broader stock index.

The FTSE 100 index was up 0.4 percent at 6,804.12 points by 0806 GMT after setting two-month high of 6,807.27 points earlier in the session. Volumes were likely to be thin as most other stock markets in Europe were closed for the May Day holiday.

The market also got some encouragement from the U.S. Federal Reserve’s assessment about the U.S. economy. The central bank looked past a dismal reading on first quarter growth and gave a mostly upbeat assessment of the economy’s prospects as it announced another cut in its stimulus.

“The Fed’s decision to reduce its bond purchases further was based on the premise that, after a tough winter, the U.S. economy is starting to show signs of strength again,” Bill McNamara, technical analyst at Charles Stanley (LSE: CAY.L – news) , said.

“This upbeat outlook ought, in principle, to be beneficial for risk assets generally and a continuation of the short-term uptrend still appears to be a realistic expectation. The February peak, at 6,856, is the next upside target (for the FTSE 100 index).”

British fund manager Schroders (LSE: SDR.L – news) gained 3.2 percent after reporting that its assets under management rose to a record 268 billion pounds ($ 452.53 billion) in the first quarter of 2014 after it took in new money across a range of products. (Reporting by Atul Prakash; Editing by Toby Chopra)