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Michael Saylor has a new favorite talking point, and it involves the tax code. The Strategy executive chairman says the company can use unrealized Bitcoin gains to fund dividends that deliver tax benefits to both equity and credit investors.
Most companies pay dividends out of profits. Strategy is pitching something different: payouts backed by a Bitcoin pile that, in theory, never has to be sold to keep the checks coming.
How the dividend machine works
The model centers on Strategy’s Digital Credit preferred equity instruments. These are products that pay regular distributions, a bit like bonds, while sitting in the company’s capital structure as preferred stock.
The key ingredient is something called Return of Capital, or ROC. Under US federal income tax rules, ROC distributions are treated differently from ordinary dividends.
Put simply, the IRS views ROC as investors getting part of their own money back rather than earning a profit. That means the tax bill is deferred, not triggered the moment the payment lands.
In February 2026, Strategy confirmed that 100% of distributions on these instruments for fiscal year 2025 qualify as nontaxable ROC. For holders, that is a meaningful difference from a standard dividend, which typically gets taxed in the year it is received.
Saylor framed the structure as an efficient way to generate income while also supporting the company’s long-term goal of accumulating more Bitcoin.
The numbers behind the payouts
The scale here is not small. Strategy has reportedly raised over $7.4 billion in gross proceeds through preferred issuances as of mid-2026.
A significant portion of that capital has gone toward buying more Bitcoin. The rest of the machinery involves managing reserves and selectively monetizing holdings to keep distributions flowing.
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According to recent filings, Strategy has paid $413 million in cumulative distributions. Those payouts came at a blended annual rate of approximately 9.6%.
Strategy has also adjusted the annualized rate on STRC, one of its preferred instruments, to 12% for 2026 periods. A higher rate makes the product more attractive to buyers, but it also raises the cost of servicing the payouts.
Strategy has carried out hundreds of millions in Bitcoin sales and monetization in 2026 to support its dividends.
From software company to Bitcoin balance sheet
Strategy has spent years turning itself into a corporate vehicle for Bitcoin exposure. Its approach has leaned heavily on capital markets, raising money and converting much of it into Bitcoin.
The Digital Credit lineup is the latest chapter in that playbook. Instead of only issuing common stock or convertible debt, the company now offers instruments built for investors who want steady income rather than pure price exposure.
The ROC treatment lets the company offer income without the immediate tax drag that usually comes with dividends.
What this means for investors and the market
For income investors, the appeal is straightforward. A yield in the high single digits or low double digits, with taxes deferred under ROC treatment, is a combination that is hard to find in traditional markets.
But deferred does not mean eliminated. Investors should understand that the tax treatment applied to fiscal year 2025 distributions, and future treatment will depend on the company’s tax position in each year.
The 2026 Bitcoin sales show that Strategy is willing to monetize holdings when needed, which highlights that the payouts ultimately rely on the asset underneath.
The higher 12% STRC rate may help attract fresh capital, yet it also increases the ongoing obligations the company has to meet.
What to watch: the company’s future tax determinations for its distributions, the pace of preferred issuance, and how often Strategy needs to sell Bitcoin to cover payouts.
