Fonterra Updates Dividend Payout Policy; Shares Reach Over 3-Year High

New Zealand’s Fonterra announced on Monday that it has revised its dividend payout policy, now committing to pay shareholders between 60% and 80% of its earnings, an increase from the average of 50% over the past five years. This change has driven the company’s shares to their highest point in over three years.

In addition, Fonterra aims to achieve a higher average return on capital, increasing its target from the previous range of 9-10% to 10-12%.

CEO Miles Hurrell stated, “Fonterra is in a strong position, delivering results well above its five-year average, which puts it in a position to think about the next evolution of its strategic delivery.”

Following the announcement, shares climbed nearly 3%, reaching NZ$3.95, the highest level since May 2021.

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

The firm mentioned plans for a “significant” capital return to shareholders contingent on the divestment of its consumer business. Earlier this year, Fonterra indicated a potential full or partial sale of its global consumer unit to unlock capital.

In recent years, the company has refocused its efforts on its core operations in New Zealand after facing protests from its 10,000 farmer shareholders regarding increasing costs and rising debt associated with its international expansion.