Crypto Dividend Darling Plunges as Investors Flee to Higher-Yield Rival

Shares of Strategy’s (MSTR) dividend-paying preferred stock, STRC, finished Tuesday at $91.79 – near a three-year low. This drop happened as the price of Bitcoin fell and worries about the company’s debt increased.

After initially being offered around $90, the stock price of STRC briefly dipped lower twice later in the month, reaching a low of $88.60.

STRC was created to maintain a price near its original value of $100. However, it’s been trading below that level for some time and hasn’t reached $100 since May 15th – the date shareholders last received a dividend payment.

As a crypto investor, I’ve seen similar patterns in token behavior – historically, STRC stock used to trade around its $100 price point right before the ex-dividend date. That’s when you stopped being eligible for the next dividend payment if you bought shares after that date. Usually, the stock would drop by about the amount of the dividend after going ex-dividend, then slowly climb back up towards $100. But on June 15th, something different happened: STRC never recovered to reach its normal price.

Several factors appear to be contributing to STRC’s persistent weakness.

This security’s price usually moves with Bitcoin, which is currently facing challenges at around $65,000 – about half of its peak value last October.

Currently, there are worries about whether Strategy can continue paying its dividends. After using some cash to pay off $1.5 billion in debt, the company now has enough funds to cover roughly seven months of dividend payments. Before making that payment, it had enough for around 24 months.

Recently, investors have been increasingly choosing a similar product from Strive (ASST) instead. Strive’s bitcoin-backed security, SATA, is consistently trading near its original value of $100 and currently offers a yearly return of around 13%, which is higher than the 11.5% return offered by STRC.

SATA provides daily dividend payments instead of distributing them every two months. Plus, Strive has no outstanding debt, meaning SATA ranks highest in the company’s financial structure and doesn’t owe anything to convertible bondholders. This is especially appealing for investors who prioritize income.

The price difference between these two investments has grown considerably. Currently, STRC is selling for about $8.20 less than SATA – this is the biggest price gap ever recorded – with SATA priced at $99.99.

Currently, STRC offers a return of around 12.53% based on its dividends and stock price – this is calculated by dividing the yearly dividend payments by the current share price. The market suggests that increasing the dividend by about 1% (or 100 basis points) could attract more investors and move the security’s value closer to its target of $100.