Strategy’s dividend obligations top $580 million

A few weeks ago, Strategy updated its MSTR guidance saying that it wouldn’t issue new MSTR shares when the stock is below 2.5x mNAV, unless it needs to raise funds to pay dividends on its preferred shares, STRK, STRC, STRF, and STRD.

The guidance says the quiet part out loud: “We won’t dilute below 2.5x mNAV, unless we need cash to cover dividends.”

Strategy said the quiet part a little louder when it updated its guidance again last week, stating that it may issue MSTR under 2.5x mNAV when “deemed advantageous to the company.”

Same script, different lines. Strategy needs to consistently raise fresh capital to keep the train going.

Strategy has historically relied on common stock offerings and convertible notes to raise cash for its bitcoin buys, but it upped the ante on its financing games when the company issued its four senior preferred shares this year.

These shares, unlike the MSTR common stock, pay dividends ranging from 8-10%. After issuing more than 64 million shares across these preferreds, Strategy has $588.7 million in dividend obligations as of August 25, 2025, according to data we cobbled together from Strategy’s preferred shares dashboards.

Strategy earned $225.55 million in revenue in the first half of 2025. Annualized, this nets out to just over $450 million. After we factor in the company’s cost of revenue ($69.72 million for the first half of 2025), Strategy’s income won’t come close to covering these dividends (nor will the $50.1 million in cash it had had on hand at the end of Q2). So where could the payouts come from? Cue stock issuance and convertible notes.

Strategy structured each preferred stock differently, but the one thing they have in common is that the dividends are fixed to a $100 par per share. This means that Strategy will always pay out 8-10% on the $100 par value instead of the stock price, so the effective dividend percentage rises or falls inversely with the stock’s value. So for instance, right now, STRF pays a 10% dividend but the stock is priced at $111.25, meaning the effective yield is ~9%.

Strategy has some wiggle room with a few of these to dictate how and when it pays dividends. With STRC, for example, Strategy can adjust the dividend rate each month so long as it doesn’t reduce it by more than 0.25% and/or set it below the SOFR rate for the month. With STRK, Strategy can pay dividends with MSTR shares as well as cash, and STRD’s dividends are non-cumulative, meaning Strategy can elect to suspend dividends for a quarter and not be legally obligated to pay them later. (The non-cumulative payout structure has evidently made STRD the least appealing to investors, as the stock is the lowest of the bunch at $79.25 at the time of writing).

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These design choices give Strategy some flexibility when managing liquidity to pay these dividends. But in addition to what it can pay from revenues, the company will have to dilute or take on more debt to service these instruments in the future. As you might expect, this has given rise to a colorful debate about Strategy operating a kind of transparent ponzi, paying out old holders with capital from new investors.

Of course, there’s another solution for liquidity: Strategy’s trove of 623,457 BTC worth $69.64 billion. It’s unlikely that Strategy will ever tap the orange well for funding (unless it’s in distress), though, because in the words of the Gigachad himself: “Never sell your bitcoin.”

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