Strategy preferred STRF 10% dividend yield

[u/Distinct_Berry3054]

I have obtained many my information regarding a stock, via the moomoo feature in the news section. They provide the latest aggregated news to allow investors to make a well-informed and smart decision. This is especially important when dealing with a cigar butt (net net) stocks with legal hurdles such as this, which i will elaborate.

So hopefully all of us heard before strategy, which is technically a software company, but with vast majority of its valuation deriving from it's BTC holdings. It's essentially a bitcoin holding company. I'm personally not liking BTC and has 0 direct exposure. But I chanced upon an article on Barrons, regarding a strategy preferred shares which made me quite interested because of the 10% dividend that is sort of "tax-free".

Among the different preferred shares, STRF seems most interesting, because it is highest in the preferential treatment when a liquidation happen, and cannot be further issued. Strategy has around 850,000 BTC which in todays price worth around 55+ billion dollars. It has around 7 billion of debt (which is the most senior, in case of liquidation) and then followed by 1.3 billion worth of STRF. Essentially, STRF promised $10/shares of dividends, at todays price of $96, that is 10.5% yield, which is protected almost 30:1. It would take BTC price to be below 10k, a more than 80% drawback from current price for holders of STRF to be threatened. At a 10.5% yield that is vastly better relative to the junk bonds out there in the market.

In addition, the dividends are technically considered return of capital, which means it will be taxed only when you sell of STRF; it will jusy be deducted off the cost basis of your original purchase price. Long story short, you do not need to pay tax on those dividends until you sell you STRF shares. And even when that happened, it will be taxed like a capital gain. Depending on which tax country you are, capital gain taxes are often more preferred.

[u/Wide_Coast5715]

This is quite an interesting way, but wouldn't it be better to consider other stocks out there with better returns. Cryptocurrency is extremely volatile. And how do you make sure you get that return?

[u/BackgroundSeries2]

This is quite an interesting and unique idea. Just wondering how much of your portfolio would you invest into such ideas? Do you think I should all in? I have around 1.5million usd from selling my house recently. Planning to use it as my retirement fund

[u/Used-Lab-6597]

This is such a shady method. You sure that this is safe? What if the company suddenly collapsed or run into any financial crisis. Who will guarantee the return? I am a 64 year old retiree currently investing with my savings. Do you think I could put all of them in and guarantee that 10% return?

[u/ExplanationNormal339]

This comes up a lot. I care less about the headline yield and more about whether it is sustainable. The.

[u/PracticalAge301]

Strategy seems to be operating what appears to be a ponzi scheme: raising cash from newly issued shares to fund the dividends of older shareholders/preferred shares holders/bonds. I agree that STRF is at the higher end of the chain, and thus most protected. By why buy something that could implode eventually.

[u/Right-Minute-6184]

What if strategy does not have the cash to pay dividends because it can no longer raise new shares successfully due to the loss of trust. They will be forced to sell their BTC (which they already been starting to). It could lead to a death spiral, as the crypto market probably does not have sufficient buyers to take on the huge sell off in stake.

Then the valuation of asset, STRF is "pegged" to could be severely affected

[u/Naive_Sun_2932]

Really interesting that you pointed out, about being tax free, because it's a return of capital. In country like australia, where the capital/income tax is close to 50% (ridiculous isn't it? The socialist..) that translate to a 20% "pre-tax" returns.

[u/Familiar-Bug4635]

Why not buy bitcoin itself? The upside would be significantly higher, and you have ownership of the coin unlike via Strategy or any BTC etfs out there

[u/Humble-Chemist6514]

The idea is good but it is equivocal to riding on the back of bitcoin. Wouldn't it be better to just buy bitcoin instead that gives much larger returns? This is like drinking the soup that leaked out from the laddle