Strategy ( MSTR ) on Monday announced a further 25 basis point increase in the dividend rate of its STRC preferred series to 10.75%. This is the fourth increase since the IPO in late July.
One of Strategy’s perennial favorite stocks, STRC, or “Stretch,” is designed to offer short-term characteristics with high dividend exposure. It currently pays a 10.75% annual dividend that is paid monthly in cash. The dividend rate is adjusted monthly to encourage trading near STRC’s par value of $100 and to limit price volatility.
When STRC launched in July, STRC initially had a 9% dividend yield for the $90 IPO. The company then raised the dividend rate twice to 10.25%, although STRC still fell short of par. A third surge finally got the price to $100, but the drop in the price of bitcoin and Strategy’s common stock touched STRC, which at one point in the November panic fell as low as around $90, sparking this latest rally.
STRC was trading at $98.43 at press time.
The updated dividend rate was announced along with news of a $1.44 billion cash buffer to fund perpetual preferred dividends. The total annual dividend obligation across all perpetual preferred stock is approximately $800 million. According to the investor presentation, the company has 74 years of dividend coverage measured against its $59 billion bitcoin reserve. Still, the cash reserve of $1.44 billion is expected to be the primary source of dividend funding in the near term.
