Strategy Inc. (Nasdaq: MSTR) executive chairman Michael Saylor published his bitcoin income model on Sept. 29, detailing how the company's bitcoin holdings generate dollar dividends for investors. Bitcoin itself pays no coupon—Strategy pays dividends under the terms of its securities, creating a distinction between direct bitcoin ownership and investing in the company's income-producing shares.
Strategy leverages its bitcoin as capital, using financing and cash reserves to convert it into dollar income for shareholders. The company secures funding by issuing new shares or by selectively selling portions of its existing holdings. Importantly, Strategy's preferred securities are not collateralized by bitcoin, meaning holders have no direct claim on specific pledged coins.
The company maintains separate pools for its cash reserves. Dollars allocated for dividends and debt interest are distinct from cash available for new investments and capital allocation. This separation ensures that funds committed to shareholder payouts are not simultaneously counted as available for asset purchases or share buybacks. A larger reserve provides Strategy with extended flexibility to meet its obligations without immediately needing to raise additional funds or liquidate assets.
Strategy's financing structure offers two distinct investment avenues. MSTR common shares provide direct ownership in the business, exposing holders to potentially larger gains and losses tied to bitcoin's price movements. This direct bitcoin exposure for MSTR holders helps stabilize income for STRC investors.
Conversely, STRC, known as Stretch, is preferred stock designed for investors seeking dollar income with reduced price volatility. STRC ranks ahead of common shares for both dividends and proceeds in the event of liquidation. This structure prioritizes income stability for Stretch holders.
Stretch currently carries a 12 percent annualized dividend rate, with cash distributions paid twice monthly. The dividend rate adjusts monthly, a mechanism designed to encourage the instrument to trade near its $100 stated value. These adjustments can also reduce STRC's sensitivity to broader interest-rate changes, though the preferred stock has no maturity date or guaranteed principal repayment.
Common shareholders also own the business segment developing what Saylor terms "digital credit"—corporate securities designed to offer income, supported by Strategy's underlying assets and financing capabilities. Digital credit connects bitcoin capital with new income-producing financial products capable of underpinning funds and investments represented on a blockchain.
Any expansion within this digital credit framework must demonstrably create value per common share. This calculation accounts for all associated financing costs, dividend payouts, cash requirements, and the impact of dilution, which reduces the proportional stake of existing common shareholders. Maintaining this value per share is a core metric for growth.
Effective management of STRC involves a continuous balance between securing new funding and addressing the obligations created by the preferred shares. Issuing new STRC shares above their $100 stated value provides a method for Strategy to raise capital. Conversely, repurchasing STRC shares can reduce the company's ongoing dividend obligations and outstanding share count. A daily dividend proposal for STRC is scheduled for a shareholder vote on Oct. 28.
