Transcription
An 11.4% effective cash yield from STRC or 14% from STRD. Should you invest?
Hello, Diamond Estic member, Super Savers, and course fans. I hope you're healthy and well.
We've gotten a lot of questions about STRC over the past few months and its effective cash yield of 11.4%. with the most recent questions coming from our VIP investment club members and another preferred from Strategy Inc. STRD pays even 14%. So, let's dive deeper into this member question of whether we would recommend purchasing STRC and why or why not.
First, a bit of background on STRC. STRC is Strategy's variable rate perpetual stretch preferred shares series A. Strategy Inc. is the company that issues or sells STRC. Strategy Inc. was previously known as Micro Strategy Inc. until it rebranded itself a year ago. Strategies common stock still trades under the ticker MSTR on the NASDAQ, meaning that we will be using strategy and MSTR interchangeably throughout this video when we're referring to the company as a whole.
So, this past Thursday, Michael Sailor, the founder and current executive chairman of MSTR, and his team presented their annual numbers for 2025, as well as a current update for MSTR. MSTR is well known in the crypto community as the original Bitcoin treasury company. In other words, they basically buy Bitcoin, hold it, and hope that the price of Bitcoin will go up. This also means that the price of MSTR is mainly driven by the price of Bitcoin, which had already been sliding since last October. So, there was some nervous anticipation before the investor call.
But MSTR was even more unlucky in that Thursday, the day of the investor call, it was another day when Bitcoin fell sharply. It traded as low as $60,075 intraday on February 5th, 2026, which was basically 52% down from its all-time peak of $126,198 last October. Now, Bitcoin did have a good Friday and stood at $70,136 at market close, which means it recovered most of its losses from Thursday. But it's still 44% down from the October all-time high, which by the way also serves as a reminder of how volatile Bitcoin can be.
Now, this sell-off triggered some community questions about whether this might be a buy the dip moment while reigniting some interest in MSTR's preferred shares, which are paying attractive dividends as I mentioned towards the beginning. So, with that in mind, here are the three topics I'll be covering today.
One, how does the 2025 annual report look for Strategy Inc. or MSTR?
Two, what does this mean for STRC and Strategy's other outstanding preferreds?
And three, what's our personal take on it? And should you buy Strategy's preferreds for their yields?
Let's dive in now, folks.
How does the 2025 annual report look for Strategy Inc. or MSTR?
So, the business model of Strategy Inc. or MSTR is very simple. buy Bitcoin, hold it, and wait or hope that it will go up in price. This strategy means that MSTR shares will move up and down with the price of Bitcoin, amplified by the leverage, the extra debt on top that they employ. And indeed, just like Bitcoin, MSTR shares had a really bad day on Thursday. As we just mentioned, they fell 17% from the previous close. However, they then more than recovered on Friday, ending the day at $134.93. But even after the strong Friday, MSTR is still down almost 65% over the last 6 months at the current time.
Despite these grim numbers, Sailor again the founder and current executive chairman of MSTR repeated on the investor call his belief that Bitcoin and the MSTR share with it will at some point recover, return to their long-term growth path and deliver outstanding returns for investors in the long run. and he can point to a track record that shows that despite the recent setbacks, Bitcoin still grew by a compound annual rate of 69% over the past 10 years from $377 on February 7th, 2016 to $7,136 as of Friday's market close. And along the way, Bitcoin has already survived several sharp corrections and long slumps, such as after an early peak in late 2017 and after the co highs in 2021. MSTR basically wants to ride out this storm again, meaning it does not plan to sell its Bitcoin holdings. rather the company will hold on to them until the price recovers and maybe even add a few additional coins in the meantime while prices are low. And the fact that MSTR reported a staggering negative operating income, in other words, an operating loss of 17.4 4 billion for Q4 of 2025 doesn't really matter that much because these are paper losses only as long as MSTR doesn't start actually selling its Bitcoin.
Now, regardless of whether it will work out or not, waiting for Bitcoin prices to recover is at least a consistent strategy. However, there is one problem for MSTR cash. Let me explain. MSTR still has a small legacy software business from the days before it turned itself into a Bitcoin treasury company, but this is break even at best and not really growing. So, the main assets that MSTR has is Bitcoin. As of February 1st, MSTR owned $713,52 Bitcoin at a cost of $54 billion, which is still a quite substantial holding even after the recent price drops. But its Bitcoin holdings don't produce any cash. They just sit on the balance sheet without generating any interest income. So MSTR strategy to solve their liquidity problem, their cash problem, has been essentially sell new securities, some bonds, but mostly ever more equity. And in the past, MSTR had no problem raising the cash it needed to cover both operating expenses and buy additional Bitcoin from issuing new equity. In fact, in 2025, it raised $23.3 billion from selling new shares in the market, making MSTR the largest US equity issuer with a market share of 6% in common equity and an even more whopping 33% in preferred equities. Given these large amounts of new equity it had to sell, it's not surprising that MSTR has been offering very attractive conditions, especially on its preferred shares to bring in new investors, which brings us nicely to the next part of today's discussion.
What does this mean for STRC and Strategy's other outstanding preferreds?
We'll focus on MSTR's preferred equities in this section and especially STRC as these seem to have piqued the most interest in our community with their attractive dividend yields. MSTR currently has four types of preferred shares outstanding in the US plus one more series in Europe that we will leave aside for the purposes of this video. All four MSTR preferreds listed in the US share four key characteristics. They are issued in perpetuity, meaning they have no set maturity date at which they will repay their principal. However, the company can call them under certain conditions. They're subordinated to all debt and are not secured in any other way either. No Bitcoin are pledged as collateral. MSTR's preferred shares are only preferred in the sense that they come before common equity. Their dividends are not guaranteed. MSTR can suspend the dividends at its discretion and without any immediate negative legal implications unlike for interest on bonds. Their dividends are also generally not qualified, meaning they will be taxed as ordinary income. However, MSTR has been classifying all of its dividends as return of capital for 2025, which defers taxation until the shares are sold.
Let's now walk through the differences between MSTR's four outstanding types of US preferred. In this column, we have the ticker symbol followed by the nickname that MSTR has given this issue and the outstanding amount as of December 31st, 2025 in billions of dollars. Next, we have the dividend rate or coupon rate, the dividend frequency, and any notable features, followed by the label that MSTR likes to use, as well as the effective cash yield of the preferred as of close of business on February 6th, 2026.
We're starting in alphabetical order with STRC, nicknamed stretch. The outstanding amount is $2.6 6 billion and it carries a variable dividend rate which is set by the board of strategy inc its sole discretion and can change every month. In its decisions, the board tries to reflect market conditions and has currently set the rate at 11.25%. The dividends are paid monthly and the fact that the board has been adjusting the rate regularly means that the share price of STRC has remained relatively stable historically. Although we have seen a bit of fluctuation. In addition, STRC has the most restrictive conditions before it can be called by the company essentially only in case of tax events or other fundamental changes. This relative stability has led MSTR to label STRC as Treasury credit. The effective yield based on the stock price at the time of this taping stood at 11.4%.
Now, let me be very clear here. While MSTR may label STRC as treasury credit, implying a certain comparability with more traditional bonds, STRC is not a bond, as we just showed you with these four key characteristics of MSTR's preferred in the US. In addition, this marketing label Treasury right here should not be confused with the US Treasury bills, notes, and bonds that many of the fixed income folks in our community hold in their portfolio. STRC has nothing to do with US treasuries, and that is simply not the right risk return comparison in our mind.
And if you're enjoying this video so far and interested in more regular conversations with me, Marcus, and our Diamond Nestic VIP members on what we would call safer yet still higher yielding income opportunities, I'd like to invite you to come join our private VIP investment club where we just released our four-part member series on corporate bond investing last week. Remember, our Diamond Nestic VIP investment club is the ideal place for you if you want to one have an extra pair of eyes for critical investing questions. Two, get ready for the retirement decisions that lie ahead for yourself or a loved one. Three, understand how a product works, its benefits, and its risks. Four, be the first to know about safe and or higher yielding investments. Five, spot and clearly understand new market trends and issues. Six, exchange perspectives with a like-minded community and or seven, continue your lifelong learning about investing and retirement. If you fall into one, some, or all of these categories, visit our website after this video at www.diamondastic.com and click on this yellow private VIP investment club button to learn more. I've also linked everything below this video for your convenience.
Moving on now to STRD, nicknamed Stride, which has an outstanding amount of $1.2 billion, carries a fixed coupon of 10% and pays quarterly dividends that are non-cumulative, meaning that MSTR does not need to make shareholders whole for missed dividends in case it suspends them. As a consequence of this feature and the higher risk of skipped dividends, STRD is labeled as highest yield by MSTR and indeed shows an effective yield of 14%.
Up next, we have STRF, nicknamed Strife, which is an outstanding amount of $1.9 billion and like STRD, carries a fixed coupon of 10% and pays quarterly dividends. However, STRF dividends are cumulative, which to be clear means that MSTR can still suspend the dividends at its sole discretion and without any immediate legal consequences. The one protection that a cumulative feature brings is that Strategy Inc., if it ever suspended the dividends on STRF will have to pay all missed dividends in a rears before it could resume any payments to the holders of common stock. For this reason, MSTR labels this class of preferred as lowest risk and the effective yield is the lowest at only 10.2%.
And finally, we have STRK or strike with an outstanding amount of $1.2 billion. STRK carries a fixed coupon of 8% and pays quarterly dividends. The notable feature of this series of preferred is that it's convertible into MSTR common stock at a ratio of 10:1, meaning shareholders can convert 10 shares of STRK into one common share of MSTR if they wish. Now at current prices this is not very attractive but it does give STRK some potential upside exposure for the future as MSTR says and results in an effective yield of 10.5%.
So these are the preferreds that MSTR offers in the US and the effective yields are certainly attractive in the current market environment. Plus, it can never hurt to have a choice between four different flavors of preferred. But before you rush out to invest right now, let's look at the elephant in the room. The question of how will MSTR raise the cash needed to pay the preferred dividends and other expenses going forward with no operational source of income. This is the main risk for owners of STRC and other MSTR preferred. If the company runs into serious liquidity issues, all preferred might be in trouble and dividend payments may have to be suspended. The differences between the four preferred issues are really not that large in this respect in our opinion. You might even be tempted to call them fair weather subtleties and may not really matter that much if worst came to worst.
On their investor call, the management team outlined a kind of three-step plan of how MSTR plans on generating the liquidity they need, the cash they need. First, they will continue selling new common and preferred shares. management seems more or less confident and or hopeful that they will be able to keep doing this and use the fresh cash from new investors to pay existing investors who hold their bonds and preferred and potentially maybe even buy some additional Bitcoin at low prices. This would solve the liquidity problem at least in the short run so long as MSTR can find new investors willing to purchase their newly issued common and preferred. But it is in our mind at least in no way guaranteed.
Second, MSTR could stop purchasing additional Bitcoin. Switch into survival mode, so to speak, and focus just on paying their operating expenses and the dividends and interest on currently outstanding securities. To their credit, MSTR has been building a cash reserve of $2.25 billion on its balance sheet since the end of 2024, which should give them a certain cushion. According to the company's calculations, they'll need $888 million per year to pay the dividends and interest on currently outstanding preferred and bonds, which means that they should be able to last about 2 and a half years.
However, there is one more complication that might lead MSTR to the potential third step. They could sell their Bitcoin holdings. So besides the preferred shares that we've been discussing here, MSTR has also issued $8.2 billion in debt that needs to be repaid when the bonds or notes mature in stages between 2028 and 2032. The MSTR management team did sound optimistic on Thursday that they might be able to refinance the bonds when they become due in a few years. Essentially issue new debt to pay off the old debt. basically the same as they're planning on doing with their common and preferred shares here. But in case that doesn't work, MSTR might have to sell some of its Bitcoin to meet its obligations. Now, no one can predict the future price of Bitcoin. So, such a force sale could lead to crystallized losses or maybe even some gains if Bitcoin recovers. Who knows? But in any case, having to sell Bitcoin might call into question the entire philosophy and purpose of MSTR, which as a reminder was founded on the idea that Bitcoin would prove too good an investment in the long run to ever sell.
And one more remark. Strategies management team on Thursday's call did not speak about potentially suspending the dividends on the outstanding preferred stock, which as we discussed they have a legal right to do anytime and at their sole discretion. And we think that they will do what they can to avoid such a step as it might negatively impact or even destroy their ability to issue more preferred in the future. And we've seen that this has historically been one of their key sources of cash. So our assumption at this time is that they'd rather sell Bitcoin than suspend the preferred dividend. But no one has a crystal ball. So only time will tell. As so often in money and investing. It's high risk for high return if you're looking at STRC. And there is a lot of uncertainty regarding how this will end.
Bringing us nicely to the next topic for today.
What's our personal take on it and should you buy strategies preferred for their yields?
So, we in the Lamur family hold only a small amount of crypto in our portfolio and we have no plans to add any more at this point in time. And even if we were to buy Bitcoin down the road, my preference would be to shy away from MSTR preferred such as STRC despite their attractive dividend yields.
In our personal opinion, you should only consider buying STRC or any MSTR preferred if you tick all of these boxes.
One, and maybe most importantly, because that's basically the foundation of the entire edifice. You have the strong conviction that Bitcoin will recover and prove a solid long-term investment. And you might point to Bitcoin's track record of previous recoveries from choppy stretches to support your case. But remember, past performance is not indicative of future results or outcomes.
Two, you believe that MSTR as a company can ride out the current storm and that its business model will prove durable and survive the test of time. Again, MSTR's business model is basically to buy and hold Bitcoin forever while at the same time selling ever more new preferred and/or common equity to generate the cash it needs to function. All future dividend payments on STRC and the other MSTR preferred will depend on this. And one more data point, S&P issued its first ever rating of MSTR in October 2025 before the Bitcoin slide really got underway. And even back then, it was rated Bminus as an issuer, deep in non-investment grade territory. Bonds in this space are also known as high yield or junk bonds.
Three, you really like the yield on STRC or any of the other MSTR preferreds, but are not necessarily counting on it for the long term. You're prepared to monitor your holdings of MSTR Preferreds on an ongoing basis and to take action and or sell at short notice if the situation deteriorates.
Four, you're comfortable with MSTR preferred as an investment class, including the lack of any guarantees or collateral, their subordination to debt, and the fact that they may be callable under certain conditions.
And five, while preferred dividends were paid as return of capital by MSTR in 2025, which defers taxation, you also don't mind that dividends may be taxed at full marginal income tax rates going forward.
Crypto is not for the faint-hearted, but if you have the required risk appetite and stamina, you would indeed have seen substantial long-term returns in the past, but everyone's financial journey is different, as we always say here at Diamond Neste. So, drop us a comment below on your personal experience with crypto andor MSTR investments and what your current thoughts are. Are you considering buying STRC for its attractive yields? Or maybe using the dip to snap up some Bitcoin on the cheap, or are you not touching any of this with a 10-ft pole?
All right, Diamond Nestic VIP members, super savers, and course fans, I hope you enjoyed today's video and learned something new. And as always, if you're interested in continuing the conversations with me, Marcus, and our Diamond Nest VIP members on topics like this one, but more so on what we would call safer yet still higher yielding income opportunities, I'd like to invite you again to come join our private VIP investment club. Visit our website at www.diamondastic.com and click on this yellow private VIP investment club button to learn more. I've linked everything below this video for your convenience. and see you again very soon with more brand new wealthb buildinging content for your financial journey.