Key facts
- Strategy is seeking shareholder approval to accrue dividends daily on its STRF, STRC, STRK, and STRD preferred stocks.
- The proposed change would include weekends and holidays for dividend accrual, with payments made on the next business day.
- Strategy believes the move will reduce reinvestment lag, enhance liquidity and market efficiency, and increase price stability.
- Shareholders are scheduled to vote on the proposal on October 28.
- STRC is expected to adopt the daily accrual schedule on November 2, with STRF, STRK, and STRD to follow on January 4.
- Strategy has paid $255 million in STRC dividends since moving to semi-monthly payments in June.
Strategy is seeking shareholder approval to accrue dividends on its preferred shares daily, including weekends and holidays, a move executive chairman Michael Saylor believes will reduce volatility and enhance liquidity. The proposal covers four preferred stock classes: STRF, STRC, STRK, and STRD.
Under the proposed change, dividends would accrue every calendar day and be paid on the following business day, with the underlying economics remaining the same. This would shift the accrual frequency from 24 record dates per year to 365. Strategy's president and chief executive, Phong Le, stated that STRC currently has 24 record dates annually, and the change would increase this to 365. For the three preferred stocks that currently pay quarterly, this represents a 90-fold increase in payment frequency.
Saylor argued that shortening the duration of an instrument and actively managing its credit, through more frequent adjustments, leads to lower volatility and easier trading. Le noted that when STRC paid monthly, its price typically fell about 49 basis points on the day before the dividend; this decline narrowed to approximately 36 basis points after the move to semi-monthly payments in June.
Strategy anticipates that daily accruals will lead to steadier month-end valuations for fund managers, facilitate faster reinvestment for institutions holding idle cash, potentially enable entry into low-volatility indices, and result in better collateral haircuts when the shares are pledged. Le described this as a pioneering move for a global security, noting that if approved, these four preferred stocks would be among five globally with daily dividends and a combined market value of $15 billion.
Shareholders have previously supported dividend frequency changes, with 97.5% of STRC holders and 99.9% of common shareholders approving semi-monthly payments in June. Since then, Strategy has paid $255 million in STRC dividends. The preferred shares are a key funding mechanism for Strategy.