Preferred stock dividends keep accumulating, but Bitcoin itself generates no cash flow. For a treasury company to pay dividends, there are only three cash sources: selling Bitcoin, issuing new debt, or using cash reserves.
In 2026, Strategy's annual preferred stock dividend obligations are about $1.7 to $1.76 billion, while its software business generates only about $477 million in yearly revenue. The gap is the hard cash shortfall the treasury must fill.
Cash Source 1: Selling Bitcoin
This is the most direct but also the most contradictory approach—using the Bitcoin holdings themselves to pay the financial costs generated by holding Bitcoin.
In June 2026, Strategy sold 32 BTC for about $2.5 million, its first Bitcoin sale since 2022. By July, the scale grew: the company sold 3,588 BTC, cashing out about $216 million to directly pay dividends on preferred stocks like STRC, STRF, STRK, and STRD.
This is not a one-time move. Strategy has established a formal "BTC Monetization Program," authorizing Bitcoin sales of up to $1.25 billion specifically to pay dividends, replenish cash reserves, and repurchase shares. In an August 1 statement, CEO Phong Le further disclosed that the current plan could involve selling up to $5 billion worth of Bitcoin.
Verification: You can check the company's SEC filings (8‑K) or earnings reports for "sale of bitcoin" or "BTC monetization" entries to confirm whether and how much Bitcoin was sold in a quarter.
Cash Source 2: Rolling New Financing
Issuing new shares to cover dividends on old shares is essentially borrowing new money to pay interest. In March 2026, Strategy raised about $1.2 billion by issuing a perpetual preferred stock called "Stretch" (ticker STRC). Similarly, in November 2025, it raised around $715 million through a euro‑denominated preferred stock, STRE.
The key to this model is that the financing cost must be lower than the expected return on assets. The problem: the cost of preferred stock financing is currently as high as about 11.5%, meaning the company is borrowing at a relatively high rate to invest in a highly volatile asset.
Risk warning: Some analysts caution that if the company keeps issuing new shares to pay dividends on old shares, the gap between dollar obligations and income will keep widening, potentially creating a "death spiral"—new financing covers old debt but creates even larger new debt. STRC once fell to a low of $82.53; the persistent discount means further issuance becomes more expensive, and this financing engine has effectively stalled for now.
Cash Source 3: Cash Reserves (from Previous Financing)
This is the safest but unsustainable method—using cash saved from previous financing rounds to cover dividends.
In a March 2026 filing, Strategy reported about $1 billion in cash reserves. By early July, through a series of capital maneuvers, the USD reserve had grown to about $2.55 billion. The company's stated target is to maintain cash reserves that cover at least 12 months of preferred dividends (roughly $1.76 billion per year).
In December 2025, Strategy explicitly set aside a $1.44 billion USD reserve solely for preferred dividends and debt interest, stating it "can cover 21 months of dividends." After continuous additions, a $3.75 billion reserve is enough to cover over two years of preferred dividends and interest expenses.
The cash reserves themselves come from financing—they are not operating profits, just temporarily parked cash. A model by former Goldman Sachs credit investor Khing Oei indicates that after deducting senior claims, Strategy's roughly $50.2 billion in assets (mostly BTC and cash) could still support about 29 years of dividends even if Bitcoin stops rising. However, the model assumes the company is not forced to sell large amounts of BTC at depressed prices.
Verification Checklist
Pull up Strategy's quarterly earnings report or 8‑K filing and check the following in order:
Cash reserve balance (Cash and cash equivalents + USD Reserve)—currently about $3.75 billion;
Annual dividend obligations—about $1.7–1.76 billion;
Software business operating cash flow—about $477 million per year;
BTC monetization authorized limit—currently up to $5 billion.
Use these four data points: If cash reserves plus expected BTC sale proceeds are less than the next 12 months' dividend and interest obligations, the cash shortfall represents real financing pressure.
Next step to watch: Monitor changes in the "BTC monetization" section after each 8‑K filing. If Bitcoin sales consistently exceed 3,588 BTC, it means the other two sources are no longer enough, and the treasury model is entering a new phase of "selling coins to cover dividends."
