(Reuters) -New Zealand's Fonterra said on Monday it had upgraded its dividend payout policy and will now pay shareholders 60%-80% of its earnings, up from the previous five years' average of 50%, sending its shares to a more than three-year high.

The dairy firm is also targeting a higher average return on capital, raising it to 10-12%, compared with 9-10% earlier.

"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," said CEO Miles Hurrell.

Shares rose nearly 3% to NZ$3.95 to their highest level since May 2021, as of 2259 GMT.

Last week, the Auckland-based company reported earnings from continuing operations for fiscal 2024 of 70 NZ cents per share, hitting the top end of its outlook range.

It declared a final dividend of 25 NZ cents per share as well as a special dividend of 15 NZ cents apiece.

The company said it intends to make a "significant" capital return to shareholders upon divestment of its consumer business.

Earlier this year, it had flagged a full or partial sale of its global consumer unit to free up capital.

Over the past few years, Fonterra has shifted its focus to its core business in New Zealand, after its 10,000 farmer shareholders protested rising costs and mounting debt tied to the co-op's offshore expansion.

(Reporting by Ayushman Ojha; Editing by William Maclean, Leslie Adler and Rashmi Aich)