Strategy's preferred shares offer compelling income with less volatility than MSTR shares, TD Cowen says

Over the past several months, Strategy has found new ways to raise money for bitcoin accumulation by offering several different preferred shares of stock. These securities "offer compelling income and price appreciation potential," TD Cowen says, "with less expected volatility than the common shares or underlying bitcoin."

TD Cowen analysts, led by Lance Vitanza, added new "buy" ratings and price targets to Strategy's STRF ($126 price target), STRK ($140), and STRD ($112) shares on Tuesday. The firm already had a buy rating and $590 target on Strategy's MSTR shares.

Perpetual preferred shares have no maturity date, but offer fixed dividend payments for as long as the company continues to operate. Strike ( STRK ) is convertible with an 8% fixed dividend while Strife ( STRF ) is non-convertible and offers a 10% fixed cumulative dividend. Stride ( STRD ) offers a fixed 10% non-cumulative annual dividend and is non-convertible.

Strategy's perpetual preferred stock programs are in addition to its "42/42" plan , which targets a total capital raise of $84 billion in equity offerings and convertible notes for bitcoin acquisitions through 2027.

"With respect to dividend coverage, we compare the annual dividend burden of $351.1 million across all three classes of preferred shares to surplus value of $53.8 billion — enough to pay dividends across all classes of preferred shares for 174 years," TD Cowen wrote in the July 1 note to clients.

Strategy holds nearly 600,00 BTC worth approximately $64 billion at current prices. TD Cowen expects the company to own "just over" 850,000 BTC by the end of 2027, which would represent over 4% of bitcoin's fixed supply.

"Strategy shares continue to trade at a significant premium, about 63%, to net asset value, a markup TD Cowen calls reasonable because every equity sale immediately converts into additional BTC per share," The Block's Naga Avan-Nomayo previously reported .

Strategy's stock traded up 6% to $394.95 per share at publication time, according to The Block's MSTR price data . The stock is up 31% year to date, giving the company a $110 billion market cap.