*

Diversified miner reports 40% half-year profit jump

*

Investors disappointed by dividend

*

Infrastructure problems cast shadow over outlook

March 6 (Reuters) - Shares in African Rainbow Minerals (ARM) plunged on Monday as a 40% jump in half-year profit was overshadowed by its dividends and concern over production and sales prospects.

Though higher commodities prices drove up half-year profit, the outlook remains clouded by South Africa's frequent power cuts and state-owned Transnet's struggles to haul minerals to ports because of a shortage of locomotives and spares as well as the impact of cable theft and vandalism.

ARM shares were down 4% at 1200 GMT despite headline earnings per share coming in at 26.38 rand ($1.45) for the six months to Dec. 31, up from 18.87 rand a year earlier, as higher coal and manganese prices offset lower output of iron ore and platinum group metals (PGM).

It declared an interim dividend of 14 rand per share, up from 12 rand a year earlier, returning $173.27 million to shareholders.

Analysts questioned ARM's dividend policy and capital allocation priorities, saying the market expected the company to pay a higher dividend in line with its strong earnings and a cash balance of about 12 billion rand ($658.70 million).

"It serves the purpose of where we've come from, but there's a request that we tighten it, so we're looking at it," ARM's executive chairman, Patrice Motsepe, said of the company's dividend policy on an analysts call.

The diversified miner, which has gold, platinum group metal (PGM), iron ore, coal and manganese assets, said its coal division's headline earnings rose by 300%, driven by higher thermal coal prices.

Earnings from manganese were up 54% on firmer prices, ARM said, while the iron ore division reported a 12% decline in headline earnings owing to lower prices and a 15% drop in export sales resulting from rail logistics challenges. ($1 = 18.2176 rand) (Reporting by Nelson Banya Editing by Sherry Jacob-Phillips and David Goodman)