A2 Milk shares jump amid $300 million special dividend

Shareholders are getting a major pay day from the infant formula company.

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A2 Milk Company Ltd (ASX: A2M) shares are in the spotlight on Thursday.

In morning trade, the infant formula company's shares are up 6% to $7.29.

This compares favourably to the performance of the S&P/ASX 200 Index (ASX: XJO), which is down 0.45% at the time of writing.

Hand with Australian dollar notes symbolising ex-dividend date.

Image source: Getty Images

A2 Milk shares jump on big news

The catalyst for today's gain has been the announcement of a special dividend.

According to the release, following the receipt of approval from the State Administration for Market Regulation (SAMR) to transition its two China label infant milk formula product registrations acquired in connection with the a2 Pokeno facility to a2 branded products, the board has decided to return a substantial amount of cash to shareholders.

A2 Milk advised that the board has now declared a NZ$300 million (A$245 million) special dividend that will be both fully franked and unimputed.

The company notes that this will be paid to eligible shareholders on 24 July 2026.

Speaking of eligibility, A2 Milk shares will go ex-dividend for this payout on 8 July. This means that investors need to own the company's shares before the market close the day before to qualify for it.

The company estimates that the dividend has a value of 41.36 New Zealand cents per share (33.9 Australian cents per share). Based on its last close price of $6.85, this represented a dividend yield of just under 5%.

Commenting on the return, A2 Milk's chair, Pip Greenwood, said:

With the necessary China regulatory approvals now in place, the Board is pleased to declare a $300 million special dividend. This reflects our commitment to delivering shareholder returns while maintaining disciplined capital management.

Should you invest?

While Bell Potter has yet to respond to this news, earlier this week it put a hold rating on A2 Milk shares with a price target of $6.90.

The broker commented:

This announcement is a positive development with regard to the internalisation of the CL supply chain and growth levers for FY27-29e. The debate at present is more nuanced around the wide FY27e consensus forecast ranges at EBITDA at NZ$296- 415m and NPAT at NZ$189-285m (both consistent on Bloomberg & VA) which is exceptionally wide for a ASX100 consumer stock.

This likely reflects the issues around 2H26e margin, the recent downgrade saw the top end of revenue consistent with the previous range but margin guidance reduced ~300bp in 2H26e, and expectations of additional marketing support in 1H27e. At current share price levels the stock sits at the more expensive side of the consumer sector (on a FY25-28e PEG ratio) and is likely to be materially more volatile given the polarising views on earnings expectations into the August guidance statement. Our forecasts largely split the divide and for this reason our Hold rating is unchanged.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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