Fonterra Updates Dividend Payout Policy

(Reuters) – New Zealand’s Fonterra announced on Monday that it has updated its dividend payout policy, now paying shareholders 60%-80% of earnings, an increase from the previous five-year average of 50%. This change has driven its shares to a three-year high.

The dairy company is also aiming for a higher average return on capital, increasing the target to 10-12%, compared to the earlier range of 9-10%.

“Fonterra is in a strong position, delivering results well above its five-year average, which positions us to consider the next evolution of our strategic delivery,” said CEO Miles Hurrell.

As of 2259 GMT, shares rose nearly 3% to NZ$3.95, marking the highest level since May 2021.

Last week, Fonterra reported earnings from continuing operations for fiscal 2024 of 70 NZ cents per share, at the top end of its outlook range. The company declared a final dividend of 25 NZ cents per share and a special dividend of 15 NZ cents per share.

Fonterra also stated its intent to make a “significant” capital return to shareholders upon the divestment of its consumer business. Earlier this year, the firm indicated a potential full or partial sale of its global consumer unit to unlock capital.

In recent years, Fonterra has shifted its focus back to its core business in New Zealand, responding to protests from its 10,000 farmer shareholders over rising costs and mounting debt from its overseas expansion.