Strategy (MSTR) announced on Monday that it will increase the dividend rate on its STRC Preferred Series by an additional 25 basis points to 10.75%. This is the fourth rally since the IPO began in late July.
One of Strategy's perpetual preferred stocks, STRC or “Stretch,” is designed to offer short duration characteristics with high-yield exposure. The annual dividend is currently 10.75%, distributed monthly in cash. The dividend rate is adjusted monthly to encourage trading around STRC's $100 par value and to limit price fluctuations.
STRC, which was founded in July, initially offered an IPO price of $90 and a 9% dividend rate. The company subsequently raised the dividend rate twice to 10.25%, but STRC still did not reach par. The third price increase ultimately brought the price to $100, but the decline in the price of Bitcoin and Strategy's common stock affected STRC, which at one point fell to about $90 during the November panic, before the latest price hike began.
At the time of writing, STRC was trading at $98.43.
The latest dividend rate was announced along with news of a $1.44 billion cash buffer intended to fund a perpetual preferred dividend. The total annual dividend obligation on all perpetual preferred stock is approximately $800 million. Compared to its $59 billion Bitcoin reserves, the company said it has 74 years of dividends covered, according to an investor presentation. Still, cash reserves of $1.44 billion are expected to be the primary source of funding near-term dividends.
