MicroStrategy Needs Only 2% Bitcoin Growth to Fund Dividends
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MicroStrategy disclosed that a mere 2.05% annual growth in its Bitcoin holdings is sufficient to cover all of its preferred stock dividends indefinitely, without the need to issue new common shares.
Michael Saylor, the chairman of the company, highlighted this figure in a recent social media update, where he also included a chart illustrating that MicroStrategy’s Bitcoin reserves, totaling 766,970 coins, are valued at approximately $58 billion.
This minimal growth rate illustrates the company’s BTC Breakeven Annual Rate of Return (ARR), indicating how much Bitcoin needs to appreciate to meet the obligations of dividend payments on preferred stock, which includes the STRC instrument.
Saylor noted that with the current growth requirements, MicroStrategy could potentially sustain its dividend payments indefinitely if Bitcoin appreciates at a rate faster than 2.05% over time. This figure is significantly lower than Bitcoin’s historical annualized returns, presenting a promising outlook for the firm’s financial strategy.
The existing BTC reserve suggests that MicroStrategy currently has the capacity to fund dividends for approximately 48.7 years, based on its holdings acquired at an average price of $75,648 per coin, reflecting a total valuation near $54.58 billion.
MicroStrategy’s STRC, which is a Variable Rate Series A Perpetual Preferred Stock, currently carries an annual yield of 11.5%. This instrument, which trades around its par value of $100, provides monthly cash dividends. Additionally, proceeds from STRC issuances are utilized for further Bitcoin acquisitions.
In his recent postings, Saylor emphasized a message to “Think Bigger,” featuring a chart that illustrates MicroStrategy’s cumulative Bitcoin purchases. Historically, his updates on Sundays have been followed by formal filings on Mondays, revealing significant new Bitcoin acquisitions by the company.
The relatively low breakeven point indicates that even minimal long-term appreciation in Bitcoin can yield sufficient returns from MicroStrategy’s reserves, allowing the firm to manage its high-yield preferred dividends while continuing its Bitcoin accumulation strategy.
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Gregory Russell
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