NEW YORK, JAN. 25 -- The stock market staged a broad advance in heavy trading today as investors focused on issues related to takeovers and pending dividend payouts.

Also bolstering the market was the dollar's relative stability against other currencies and last week's bond rally, which sent interest rates lower and made stocks more attractive. Bond prices were little changed today.

At the close, the Dow Jones average of 30 industrial stocks stood at 1946.45, up 42.94 points from Friday, when the closely watched indicator picked up 24.20 points. It was the second-biggest gain since a 76.42-point increase Jan. 4.

Advancers outpaced decliners by about 11 to 4 among New York Stock Exchange-listed issues. Big Board volume totaled a hefty 275.25 million shares, making it the 11th busiest day in history, surpassing the 268.91 million shares traded on Nov. 30 last year.

Of Monday's total volume, about 42 percent, or about 112.34 million shares, consisted of shares in five companies due to pay dividends soon. They were Southern Co., up 1/4 at 24 1/4; Pinnacle West Capital, up 3/8 at 29 5/8; Cincinnati Gas & Electric, up 1/4 at 21 5/8; Chase Manhattan Bank, up 1/8 at 21 5/8, and Eastern Utilities Associates, up 3/8 at 29.

Japanese traders were heavy buyers of dividend-related stocks, since their tax laws make it worthwhile to buy the issues for the dividends even if they sell them at a loss soon afterward, said Edward P. Nicoski, a technical analyst at the Piper Jaffray & Hopwood Inc. securities firm.

Oppenheimer & Co. analyst Michael Metz said investors in general were also "putting more emphasis on total return," looking for both capital gains as well as good dividend payouts.

But the driving force of the day's market was "the takeover game," Metz added.

On Monday, Federated Department Stores soared 13 1/8 to 49 after Canadian developer Campeau Corp. bid $4.2 billion for the company. New York developer Donald Trump was also rumored to be interested in Federated.

Eastman Kodak, however, lost 4 1/4 to close at 44 7/8 per share, while Sterling Drug jumped 9 a share to 87 3/4 following Kodak's $89.50-a-share bid for Sterling last week.

Other drug companies also posted gains, cited by traders as possible new targets by Hoffmann-La Roche, which lost Sterling to Kodak.

Merck was up 3 1/8 at 153 1/8, Pfizer was up 1 at 52 3/8 and Eli Lilly was up 1 1/4 at 77 3/4.

Among other takeover stocks, Computervision closed unchanged at 14 3/4 in the wake of Prime Computer's bid of $15 per share. Prime was also unchanged at 14 7/8.

Analysts said the market was encouraged that the dollar held steady against other currencies.

William Tiritilli, an analyst at the Rodman & Renshaw securities firm in Chicago, said program trading also helped pushed the market up.

In this strategy, professional traders using computers profit on differences between stock index futures and their underlying baskets of stocks.

Among other issues, Boeing advanced 2 1/8 to 45; IBM rose 2 3/4 to 113 1/4 and Digital Equipment rose 4 3/4 to 124 3/8.

Nationwide turnover in NYSE-listed issues, including trades in those stocks on regional exchanges and in the over-the-counter market, totaled 302.91 million shares.

The NYSE index was up 2.82 at 141.51. Standard & Poor's index of 400 industrials rose 6.47 to 289.18, and S&P's 500-stock composite index was up 5.67 at 252.17.

At the American Stock Exchange, the market value index rose 1.43 tp 267.05. The Nasdaq composite index for the over-the-counter market closed at 340.51, up 2.92.

The Wilshire Associates 5,000 Equity Index, the market value of 5,000 NYSE, American and over-the-counter issues, rose $44.64 billion to $2.475 trillion, or 1.84 percent higher than Friday.