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 launch at the end of July.
One of Strategy’s perpetual preferred stocks, STRC, or “Stretch,” is designed to offer short duration characteristics with high yield exposure. It currently pays a 10.75% annual dividend, distributed monthly in cash. The dividend rate is adjusted each month to encourage trading near STRC’s $100 par value and to limit price volatility.
When launched in July, STRC initially carried a 9% dividend rate at the IPO price of $90. The company then raised the dividend rate twice to 10.25%, although STRC still did not reach par. A third increase finally got the price to $100, but the tumble in the price of bitcoin and Strategy’s common stock touched STRC, which at one point in the November panic fell as low as about $90, setting in motion this latest increase.
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 intended to fund perpetual preferred dividends. The total annualized dividend obligation across all perpetual preferred shares is about $800 million. According to the investor presentation, the company has 74 years of dividend coverage when measured against its $59 billion bitcoin reserve. Even so, the $1.44 billion cash reserve is expected to be the primary source of near term dividend funding.