Strategy's billion-dollar buffer: securing the future of top dividend stocks?

Strategy (MSTR), as one of the largest bitcoin holders among publicly traded companies, has reinvented itself as an attractive choice for investors seeking dividend stocks. The company recently took significant steps to strengthen its cash position, providing immediate benefits for shareholders relying on regular income.

In the world of top dividend stocks, certainty is essential. Strategy has now demonstrated that it takes this seriously by expanding its dollar reserves to $2.2 billion. This occurred after the company sold shares worth $748 million on Monday, significantly increasing available liquidity.

Two and a half years of dividend coverage thanks to massive cash buildup

Strategy’s extensive cash position offers a substantial financial safety net. With annual dividend obligations for preferred shares of approximately $824 million, this means the company can guarantee more than two and a half years of payments without additional income.

For dividend stock investors, this is a crucial indicator. The runway extends beyond the next bitcoin halving, an event likely to occur in April 2028. This ensures uninterrupted dividend payments through 2028, setting Strategy apart in a broader selection of top dividend stocks.

This buffer also provides flexibility to withstand a potential “bitcoin winter,” should the price of BTC (currently around $78,550) follow the conventional four-year market cycle. The available resources can absorb volatility without compromising dividend obligations.

Convertible bond in 2027: no risk for dividend investors?

An important milestone approaches: in September 2027, a $1 billion convertible bond matures. For dividend stock investors, this is a critical moment, but Strategy appears prepared.

Based on the current share price of around $165 (about 12% below the conversion threshold of $183 per share), a cash repayment would be necessary if no price increase occurs. However, Strategy owns 671,268 BTC, which provides additional maneuvering room. Only a small portion of these holdings would be needed for a cash settlement.

According to analyst Jeff Walton, Chief Risk Officer at Strive, the current reserve is sufficient to fully cover this bond. Afterward, there remains 15 months of dividend coverage, indicating that dividend stock investors are well protected.

Why Strategy stands out among top dividend stocks

Strategy combines two worlds: bitcoin exposure and guaranteed dividend income. For investors seeking top dividend stocks with some upside potential, it offers a unique proposition.

The MSTR stock has declined about 45% so far this year and trades around $163. Despite this volatility, the dividend policy remains steadfast, supported by a billion-dollar buffer. This makes it a special case among dividend stocks: protected against liquidity issues but still exposed to bitcoin price movements.

The combination of substantial cash reserves and thoughtful debt management positions Strategy as a dividend strategy with distinctive features. Whether the company remains in the top dividend stocks selection ultimately depends on how both the bitcoin and dividend landscapes develop in the coming months.