Strategy Implements Tax-Free Return Structure on Preferred Stock Dividends Starting 2025

Strategy, a prominent Bitcoin treasury company, has unveiled a transformative adjustment to its dividend framework beginning in 2025. Under this revised policy, distributions on its preferred stock are now positioned as tax-free returns of capital (ROC) in accordance with U.S. federal income tax regulations. The company officially disclosed this structural change through Form 8937 filing, establishing the foundation for this tax-advantaged treatment approach.

Preferred Stock Architecture and ROC Tax Classification

The preferred stock offerings have been instrumental in Strategy’s capital raising efforts, generating approximately $7.4 billion in total proceeds. Under the new ROC structure, dividend amounts that remain within the investor’s tax basis receive favorable tax treatment, while any excess above this threshold gets classified as capital gains. This layered approach provides significant advantages for preferred shareholders seeking tax-efficient returns.

Dividend Performance Metrics and Sustainability

To date, Strategy has distributed roughly $413 million in preferred stock dividends, with the weighted annualized dividend rate maintaining a competitive level of approximately 9.6%. The company’s confidence in sustaining this preferred stock dividend framework appears robust, with management projecting the continuation of ROC tax treatment throughout the coming decade. This long-term commitment underscores Strategy’s commitment to delivering sustainable returns to its preferred shareholders while optimizing the overall tax efficiency of the capital structure.

The framework represents a strategic evolution in how Bitcoin treasury companies structure preferred stock offerings to align with shareholder interests and U.S. tax policy parameters.