Investing for Income

The ‘Bividend’: What’s Up With BTCS’s Bitcoin Dividend?

A blockchain company’s first dividend paid in bitcoin might raise some eyebrows … but it’s also unlikely to be the last.

Apparently "bividends" are going to be a thing now. 

BTCS (BTCS, $4.36), a self-proclaimed blockchain technology-focused company, on Wednesday announced the first-ever dividend payable in bitcoin by a Nasdaq-listed company. 

And while it might be contradictory in nature to the purpose of traditional cash dividends, you can probably still expect more bividends to pop up from other companies down the road.

The BTCS "Bividend"

BTCS intends to pay shareholders of record a one-time dividend of 5 cents per share in bitcoin, based on the bitcoin price on the ex-dividend date. Investors who do not elect to receive the bividend in bitcoin will receive a cash dividend of 5 cents per share. 

"We want to reward our long-time shareholders for their continued support and encourage financial freedom by providing the means to enable direct ownership of bitcoin and other digital assets,” CEO Charles Allen said in a press release.

Before you can say "make it stop," know that plenty of crypto-commenters have already begun poking holes in the premise of paying dividends in bitcoin. 

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For one thing, above all else, bitcoin and cryptocurrencies in general are attractive primarily as speculative assets. Traders love them for their volatility and return potential.

No one buys bitcoin for its future cash flow because bitcoin has no future cash flow. Buying bitcoin for income – that is, for the dividends, which are paid out of cash flow – makes even less sense.

And this is a one-time dividend to boot.

A Stunt? Possibly. But Bividends Might Be Here to Stay

All you really need to know, in the words of Bloomberg's Matt Levine, is that BTCS "is a somewhat unloved micro-cap company," but it did pull off an effective marketing trick. After all, BTCS shares popped more than 40% the day of the news drop.

"A bividend is a terrible name but an obviously good meme-y crypto stunt to increase attention," Levine writes. "BTCS will pay about $500,000 in bividends, which bought it about $15 million of market cap. Just a good trade!"

But also be aware that BTCS stock is still off nearly 50% since its September Nasdaq debut. Its market cap, at less than $45 million, remains pitiable. And its daily average volume of 1.2 million shares reveals a distinct lack of interest among market participants on most trading days. 

Where this gets interesting – or maddening, depending upon your point of view – is that BTCS is unlikely to be the last issuer of a crypto dividend. That's because, if nothing else, BTCS' move worked remarkably well as an attention-getting device. Somewhat regrettably, we're talking about BTCS in this post right now

But the firm's one-time bitcoin (or cash) payout doesn't change the investment thesis on BTCS stock (whatever that might be).

As for the concept of bividends more broadly, it stands to reason we'll see copycats – and probably plenty of them – soon enough. Suffice to say that for the time being – and then some – quaint, old-fashioned common stock dividend investors would do well to tune out this noise.

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