Strategy revolutionizes its risk profile with dividend-paying stocks

Strategy has implemented a significant transformation in its capital structure that could serve as a model of financial management in the industry. By prioritizing dividend-paying stocks over traditional convertible bonds, the firm has considerably reduced its refinancing pressures while maintaining its aggressive bitcoin accumulation strategy.

Perpetual Preferred Capital Redefines Risk Structure

The turning point came when the notional value of Strategy’s perpetual preferred equity reached $8.36 billion, surpassing $8.2 billion in outstanding convertible debt for the first time. This transition represents much more than a numerical shift: it signals a fundamental shift in how the company manages its financial obligations.

Perpetual preferred stock operates on completely different principles than convertible bonds. While the latter have fixed maturities (Strategy’s closest one matures at the end of 2027 with approximately $1.2 billion in nominal obligations), preferred shares do not have an expiration date or require principal repayment. Both categories pay regular compensation to holders, but the former offer predictable stability.

Stable dividends: the strength of dividend-paying stocks

Strategy’s preferred note stack includes four structured issuances: three instruments of $1.4 billion each, one of $3.4 billion and one of $1.3 billion. Combined, these generate approximately $876 million in annual dividends, a figure that the company can comfortably cover thanks to its cash reserve that recently increased to $2.25 billion.

This combination of predictable dividend streams with solid cash buffers creates an environment where dividend-paying stocks become risk-controlled instruments. Dylan LeClair, head of bitcoin strategy at Metaplanet, captured the essence of this shift: “By not having convertible bonds with priority over preferred stock, it should not only improve absolute credit spreads, but also reduce the volatility of those spreads.”

Bitcoin accumulation without refinancing pressure

The previous financial architecture introduced vulnerabilities of a specific type. Convertible bonds generate refinancing pressure on fixed maturity dates, and their effective age fluctuates with movements in the price of common stocks. This created credit volatility exactly when Strategy needed maximum flexibility to fund its growing position in bitcoin.

By transitioning to stocks that pay perpetual dividends, Strategy has decoupled its digital asset accumulation plan from debt market refinancing cycles. The number of Class A shares outstanding has grown significantly from 76 million in 2020 to more than 310 million currently, which, paradoxical as it may seem, mitigates the dilutive impact of future bond conversions.

With bitcoin trading around $84,870, Strategy’s financial architecture reflects a strategic maturation: using dividend-paying stocks as a tool to create credit stability while pursuing long-term accumulation goals. This approach could inspire other companies looking to align their capital structures with multi-year investment strategies without compromising financial health.