Shareholder Return and Capital Allocation
ABB’s capital allocation priorities remain unchanged:
1) funding organic growth, R&D and capital expenditures at attractive cash returns;
2) paying a steadily rising, sustainable dividend;
3) investing in value-creating acquisitions;
and 4) returning additional cash to shareholders.
ABB’s strong cash generation continued in 2016.
Free cash flow grew 2 percent compared to the previous year and the return on invested capital increased further to around 14 percent. The strong cash generation allows for significant deployment of capital. From 2014 to 2016, ABB has returned around $8.7 bn to shareholders in the form of dividends and share buy backs. Capital allocation including acquisitions as well as investments for organic growth through capital expenditures, Research & Development as well as sales expense totaled around 27 bn from 2014 to 2016.
ABB announced in October 2016 its plans for a new share buyback program of up to $3 bn from 2017 through 2019.
This reflects the company’s confidence and the continued strength of ABB’s cash generation and financial position. On September 30, 2016, ABB announced the completion of its recent share buyback program in which it returned $3.5bn to its shareholders. Active portfolio management remains a key aspect of ABB’s operating pattern as demonstrated in the recent portfolio pruning and bolt on acquisitions as well as the announced cable business divestiture and business model changes in Power Grids.