A $9 million early dividend payout of 10 cents per Fonterra share will provide a small but much-needed financial buffer to Northland dairy farmers until August while their stock is being dried off.
Dairy giant Fonterra yesterday announced it would pay its forecast final dividend on June 7 rather than in the last quarter of this year, which should help farmers struggling with cash flows due to lower global milk prices. It will be worth about $9 million to Northland farmers.
Farmers last year received their first dividend of 20 cents per share and another 10 cents next month would mean Northland dairy farmers, who supply 90 million kg of milk solids to Fonterra each year, would have received $27 million across all three dividend payouts.
Fonterra intends to declare another 10 cents per share dividend in August, subject to its financial performance.
However, not all dairy farmers will receive the dividend payment next month and in August, as some, such as sharemilkers, do not hold full shares in Fonterra. Contracted farm owners hold shares in Fonterra and receive dividends per share. The dividend payment is separate to the milk payout.
Waiotira dairy farmer Peter Skelton said next month's dividend would certainly help cash flow, but only to a certain extent because the amount was relatively small.
"There are people who've bought farms in the past two or three years who do not hold full shares at the moment so they'd be worse off," he said.
Federated Farmers' Northland dairy chairman Ashley Cullen said the dividend and stock sales were what farmers would survive on from now until August, as stock dry-off meant there would be little milking for the next eight to nine weeks.
"Any extra income you can get at this time of the year certainly helps because it'll be a long time before the next one (revenue) comes," Mr Cullen said. "For us, August 20 is when we get any income from the cows that calve in July. But the impact of low milk price is also felt by support businesses that farmers deal with."
He said, since Fonterra was floated on the stock exchange, farmers could also buy extra shares but the way the global milk prices have been fluctuating recently, he doubted anyone would have held on to extra shares.
Fonterra board chairman John Wilson said the earlier payment in June met the company's goal of getting cash to farmers earlier in winter when they needed it.
"The earlier payment meets our goal of getting cash to farmers earlier in winter when they need it, as we signalled at our interim results announcement. Our total forecast dividend is 40 cents per share for the year. We intend to declare another 10 cents per share dividend in August, subject to financial performance continuing to support the current forecast earnings per share range of 45 to 55 cents," Mr Wilson said.
Meanwhile, the opening 2016/17 season forecast farmgate milk price will be announced at the end of May.