The “12% Yield Breakthrough” at the center of Nick Giambruno’s Financial Underground pitch resolves to a single, publicly traded security: STRC, the Series A perpetual preferred stock of Strategy, the company formerly known as MicroStrategy. The teaser describes something that is “not a money market fund, not a bond, not a common stock, not rental property,” and that is exactly right. STRC is a preferred stock with a very specific structure, and understanding that structure is the difference between a smart income trade and a misunderstood one.

How STRC Actually Works

STRC is one of several preferred securities Strategy has issued to fund its accumulation of Bitcoin. It pays a 12 percent annual dividend, in cash, on a semi-monthly schedule, which means investors genuinely receive a payment twice a month. That “paycheck-like” cadence is not marketing flourish; it is how the instrument is designed.

The rate is variable in a clever way. Strategy adjusts the dividend monthly to encourage the shares to trade around their $100 par value, which strips out price volatility and makes the security behave more like a bond than a stock. At its August 2026 price near $95, the effective yield is actually a touch above the headline number, around 12.6 percent.

The Tax-Deferred Part

The “tax-deferred” claim is also accurate, and it works through a mechanism many income investors have not encountered. STRC’s distributions are classified as return of capital rather than ordinary income. That means you do not pay income tax on the payments in the year you receive them. Instead, each payment reduces your cost basis, so you effectively pay capital gains tax later, when you sell.

That is a real advantage for a retiree in a high tax bracket, and it is one of the more underappreciated features of this structure. We explain the mechanics in more depth in our tax deferred income investments explainer.

The Safety Question

This is where the pitch gets loose, and it matters. The promo describes the security as “overcollateralized” by “unencumbered hard assets,” with more than three times reserve coverage and enough assets to cover thirty-two years of obligations. The underlying facts are directionally true: Strategy holds enough Bitcoin that the preferreds are covered roughly four-and-a-half times over at current prices, a bit above the figure in the ad.

But the word “collateralized” implies a legal lien, and there is none. The Bitcoin sits on Strategy’s general balance sheet. It is not ring-fenced or pledged specifically to STRC holders. The “thirty-two years of coverage” is a solvency ratio, a statement about how many years of obligations the company’s assets could theoretically cover if it liquidated, not a dedicated reserve that pays you regardless.

Where the Risk Lives

The deeper issue is how Strategy funds a 12 percent dividend. It is a Bitcoin treasury company with no meaningful operations and no revenue to speak of. It can pay dividends by selling Bitcoin, or by issuing new preferred stock, new common stock, or new debt. That model works beautifully while Bitcoin’s dollar price is rising and investors are eager to fund the treasury, and it gets uncomfortable fast when Bitcoin falls.

We have a recent proof point. During the May and June 2026 crypto selloff, STRC fell from near its $100 par to a low around $70, a 30 percent drawdown on a security being sold as a low-volatility income vehicle. Strategy responded by selling Bitcoin and raising liquidity to defend the preferreds, and STRC recovered to the mid-90s. That management response is genuinely encouraging, but it also makes the point plainly: this instrument moves when Bitcoin moves. For the full picture on the company behind it, see our MSTR stock explainer.

How STRC Compares to the Rest of the Stack

STRC is not Strategy’s only preferred, and the differences between the four are instructive. STRF, nicknamed “Strife,” is the senior-most of the group and pays 10 percent, and it has held up best, trading near $98. STRD, or “Stride,” also pays 10 percent but has fallen to around $70, reflecting its lower position in the capital structure. STRK, the “Strike” convertible, pays 8 percent and trades below $70, in part because it can pay dividends in MSTR common stock rather than cash.

The spread tells you a lot about how the market prices risk across the stack. The instruments with the strongest claims and the most bond-like behavior trade closest to par. The ones further down, or with conversion features that muddy the yield, trade at meaningful discounts. If the goal is a stable cash stream with the least price volatility, the senior end of the stack is arguably the more defensible version of the same idea, even at a slightly lower yield.

None of this changes the central point: every one of these securities is ultimately a claim on a company whose fortune tracks Bitcoin. Choosing among them is about where you want to sit in that structure, not whether you are exposed to it at all. Our high yield preferred stocks explainer covers how to think about that choice across the market more broadly.

Ready to see the research? Click here to access Nick Giambruno’s report.

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