Acquire first when deals clear your hurdle, pay a steady dividend from what is left, and buy back stock only when it trades below its value. No formula is disclosed, but the policies are. As of October 2026, Lifco pays 30 to 50% of after-tax earnings (33.8% proposed for 2025) and spent SEK 3,360M on acquisitions against SEK 1,090M of dividends. Judges Scientific has a policy of raising its dividend by at least 10% a year, subject to cover, and reported no buyback programme. Constellation paid $85M of dividends in 2025 against $1,227M of cash on acquisitions. Berkshire paid one cash dividend from 1965 to 2024 and says it buys back stock when it trades below its estimate of intrinsic value.
The disclosed policies point to one order. First, buy businesses that earn more than your hurdle. Second, keep the debt at a level that survives a bad year. Third, pay out the cash that acquisitions cannot absorb at your hurdle. Fourth, buy back stock only when the price is below what the business is worth.
Constellation's president's letters state the first and third points. The 2017 letter says it invests retained capital when it expects to reach its hurdle rates and otherwise holds its hurdle rates and builds cash, with a stated plan to return free cash flow to investors. The 2021 letter adds that it stopped special dividends except in the most compelling circumstances and keeps a regular quarterly dividend "for now" (2021 President's Letter).
Berkshire's 2025 letter, signed by Greg Abel as CEO, says it will buy back shares when they trade below its estimate of intrinsic value, conservatively determined (2025 letter). The 2018 letter calls blindly buying an overpriced stock value-destructive (2018 letter). That letter also pledged to hold at least $20 billion in cash equivalents, but it ties the pledge to calamities, not to buybacks. Of the other groups above, I found no buyback at Lifco or Judges and none discussed in the Constellation letters I opened.
Two practical points for a small public holding company. A buyback needs a stock price you trust, and thinly traded shares rarely give one. And cash spent on stock is cash not spent on acquisitions that might clear the hurdle. My view is that a buyback is the last use of cash, not the first.
Constellation's 2021 letter describes a director who argued that the company could invest better than most shareholders and should stop dividends and lower hurdle rates. The author says he used to argue that dropping hurdle rates for a few marginal deals would lower returns on the whole portfolio. The letter then moves part of the way: special dividends stop except in compelling cases, the quarterly dividend stays for now but could be sacrificed if better uses for cash are found, and small and mid-sized deals keep traditional hurdle rates. For very large deals, which need multihundred-million-dollar equity cheques, it says lower hurdle rates would get Constellation into more auctions (2021 letter).
Worked example (assumptions only). A holding company has $1.0M of free cash after debt service. Assume a 25% tax rate.
On these inputs, the acquisition beats a buyback at 10x earnings, ties one at 8x (12.5%) and loses if the stock trades below 8x earnings. The comparison ignores growth, deal risk and integration cost. If no deal beats the buyback or your hurdle, pay out the cash.
Where these numbers come from: Lifco figures are from its Annual and Sustainability Report 2025 and year-end report. Addtech is from its 2025/26 year-end report. Judges is from its FY2025 results. Constellation is from its Q4 2025 release and 2017 and 2021 letters. Berkshire is from its 2018, 2024 and 2025 letters. The examples are the site's assumptions.
It can, but only from cash or reserves, and company law limits it. Confirm with your securities lawyer. Without free cash flow, a dividend is returned capital, not profit.
A dividend is equal to all holders and does not depend on the stock price. A buyback helps only if the price is below value, and it benefits holders who do not sell. The choice is a price decision.
The disclosed groups started from a base of earnings. Until acquisitions reliably clear the hurdle, retained cash usually has a higher use. Treat this as a view, not a rule.
If you choose to keep acquiring, the next question is deal size: How big each acquisition should be.
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