How STRC's Dividend Rate Is Set: The VWAP Mechanism Explained

STRC has raised its dividend rate seven times since its July 2025 IPO — from 9% to 11.50%. That progression was not random. It was driven by a formal framework that Strategy published in SEC filings, tying the monthly rate recommendation to STRC's five-day volume-weighted average price relative to its $100 par value. Understanding exactly how this mechanism works — and how it evolved through successive filings — is important for any investor holding or evaluating STRC.

What the IPO prospectus actually said

When STRC launched in July 2025, Strategy's 424B5 prospectus described the rate adjustment mechanism only in general terms. The company stated its intention to recommend dividend increases when STRC traded below par and decreases when it traded above par, with the goal of keeping the instrument near its $100 stated value. No formal thresholds or step sizes were published at IPO — the original prospectus described a discretionary policy, not a rules-based framework.

One further detail worth noting: while STRC carries a $100 par value, the IPO issue price was $90.00 per share. That meant investors purchasing at IPO received an effective yield of approximately 10% on their cost basis, even though the stated rate was 9% of par. With the instrument trading 10% below par from day one, the adjustable-rate mechanism was always going to face early pressure to move upward.

The formal framework that would govern all subsequent rate changes was introduced two months after launch.

The August 2025 8-K: a formal framework is introduced

On August 28, 2025, Strategy filed an 8-K with the SEC that formally introduced a tiered VWAP-based dividend adjustment framework. This is the filing that first specified the exact price bands and basis point movements that now govern STRC's monthly rate recommendations. The measurement uses a five-day VWAP window — specifically, the five trading days prior to the last trading day of each month — and maps the result to a management recommendation for the following month's rate:

A common approximation in circulation is that "STRC below $98 triggers a 0.50% rate increase." The actual framework is more nuanced. The $95–$98.99 band triggers only a 25 bps (+0.25%) increase. A 50 bps increase requires the price to fall below $95. Both figures are stated minimums — "or more" — meaning the board can recommend a larger adjustment at its discretion for either band. The September 2025 jump from 9% to 10% (100 bps in a single month) is an example of that discretionary power being exercised.

The February 2026 8-K: the framework is reaffirmed

On February 5, 2026, Strategy filed a second 8-K re-publishing the same four-band framework as a formal update to the dividend adjustment policy. The thresholds and basis point increments are identical to the August 2025 filing — this is a reaffirmation rather than a change to the terms. Reviewing both filings confirms that the rules governing all rate decisions from September 2025 onward have remained unchanged. The framework that was introduced eight months ago is the same one in effect today.

Contractual floors: what the Certificate of Designations requires

The VWAP framework represents management's stated intention, not a hard contractual obligation — Strategy has disclosed it can be changed or suspended at any time at the board's sole discretion. However, the Certificate of Designations — the binding legal document that governs STRC's terms — imposes hard contractual limits on how the rate can be reduced:

• Strategy cannot reduce the monthly rate by more than 25 basis points per period, plus any excess of the prior month's one-month term SOFR rate over the minimum SOFR during that period.
• Strategy cannot reduce the rate below the prevailing one-month term SOFR rate — giving STRC a floating rate floor that tracks short-term interest rates.
• Strategy is not entitled to reduce the rate at all unless all previously accrued and unpaid dividends have been settled in full.

These provisions create an asymmetric ratchet effect: there is no contractual ceiling on rate increases — Strategy can raise the rate by any amount at any time — but rate reductions are structurally constrained to small increments (25 bps at a time), cannot cut below SOFR, and require a clean payment record. A halving of the rate would take many months under this framework. That slow-ratchet constraint is meaningful protection for investors focused on income predictability.

The complete rate history

Seven consecutive monthly increases from September 2025 through March 2026 reflect STRC trading persistently below par during that period, as Bitcoin prices fell and the instrument struggled to attract buyers above $95–$99:

• August 2025: 9.00% — first dividend payment at IPO rate ($0.750/share)
• September 2025: 10.00% — +100 bps; discretionary jump reflecting deep below-par trading ($0.833/share)
• October 2025: 10.25% — +25 bps ($0.854/share)
• November 2025: 10.50% — +25 bps ($0.875/share)
• December 2025: 10.75% — +25 bps ($0.896/share)
• January 2026: 11.00% — +25 bps ($0.917/share)
• February 2026: 11.25% — +25 bps ($0.938/share)
• March 2026: 11.50% — +25 bps ($0.958/share)
• April 2026 onward: 11.50% — stable; VWAP consistently in the $99–$101 neutral zone

The September jump — 100 bps in a single month — was more than double the standard 50 bps minimum for sub-$95 trading. It reflects board discretion being used aggressively to stabilise a newly launched instrument that had opened significantly below its $100 par value.

Why the rate has held at 11.50% since March 2026

STRC's rate has been unchanged for four consecutive months. Under the VWAP framework this signals one thing clearly: the five-day VWAP at the end of each measurement window has been landing in the $99–$101 neutral zone. The successive rate increases attracted buyers, pulled the price back toward $100, and the framework automatically signalled no further change was needed once stability was achieved. In this sense the mechanism has worked exactly as designed — a self-correcting loop that uses the income rate to manage price proximity to par.

A pending change: semi-monthly dividend payments

At the time of writing, Strategy has proposed switching STRC from monthly to semi-monthly dividend payments. A shareholder vote on the proposal is scheduled for June 8, 2026. If approved, investors would receive two payments per month rather than one. The annual yield rate would be unchanged — only payment frequency would increase. For investors who reinvest, more frequent payments offer a marginal compounding advantage; for those taking income as cash, the total annual amount received would be identical.

Reading the SEC filings yourself

All documents referenced in this article are publicly available on the SEC's EDGAR system. The three most important filings for understanding STRC's rate mechanism are the original 424B5 prospectus supplement (July 2025, which contains the Certificate of Designations and its contractual rate-reduction limits), the 8-K filed August 28, 2025 (which introduced the formal four-band VWAP framework for the first time), and the 8-K filed February 5, 2026 (which reaffirmed the same framework).

Strategy's complete EDGAR filing history can be accessed at SEC EDGAR — Strategy Inc (CIK 0001050446). Filtering by form type 8-K will surface both framework filings; filtering by 424B5 will surface the original prospectus and any follow-on offering supplements.

SATA — the preferred stock issued by Strive — uses a different approach to setting its rate: a wholly discretionary board decision with no published price bands and no mandatory step sizes. For a direct comparison of the two mechanisms, see How SATA's Dividend Rate Is Set — And Why It Differs from STRC.

This article is for educational purposes only and does not constitute financial advice. Rate framework details are based on publicly available SEC filings as of June 2026. The dividend adjustment framework is management's stated intention and may be changed or suspended at any time. Always consult a qualified financial adviser before making investment decisions.