The Schwab US Dividend Equity ETF (SCHD) has grown into one of the largest dividend funds in the United States. It has accumulated over $90 billion in assets, with investors loving its dividend and stock growth. Indeed, its total return this year has outperformed those of the Nasdaq 100 and the S&P 500.
BMNP vs SCHD Uses Different Approach to Pay Dividends
The BitMine Immersion Technologies 9.5% Series A Perpetual Preferred Stock (BMNP) has recently made headlines after dropping to $79.73 following its launch.
Some investors have embraced the fund because of its strong dividend yield. It pays an annual return of about 9.5%, much higher than SCHD’s 3.2%. Also, it pays its dividends weekly, while SCHD pays them on a quarterly basis.
BMNP has come under scrutiny after it crashed below its par level following the woes at Strategy (MSTR), where its preferred stocks plunged. STRC, STRD, and STRK dropped sharply as investors worried about whether Strategy would be able to meet its payout obligations.
However, the reality is that BMNP is significantly safer than STRC and other funds that Strategy runs. That’s because the two companies use a different business model. Strategy accumulates Bitcoin, an asset that pays no yield. BitMine, on the other hand, accumulates Ethereum, an asset that generates a monthly staking yield.
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Another difference is that BitMine has no debt on its balance sheet, whereas Strategy has over $5 billion in debt. Recently, Strategy paid off debt worth over $1.5 billion.
BitMine plans to spend about $34 million in dividends annually to BMNP shareholders. This is a highly affordable amount, given that it uses MAVAN to stake its Ethereum holdings. Assuming it’s 6 million staked Ethereum that earns a 3% return, it will earn 180k coins each year.
Assume that Ethereum tumbles from the current $1,720 to $500, the company will still make $90 million, which is enough to cover its dividends. Also, BitMine holds $555 million in cash on its balance sheet, which is enough to cover its dividend payouts for over 15 years.
BMNP Pays a Higher Dividend Than SCHD
As such, while nothing is guaranteed, there are signs that BMNP is a fairly cheap asset. In this case, $10,000 invested in the fund will bring in about $950. The real dividend return will be higher if the stock declines more gradually.
A similar investment in the SCHD ETF will yield $325 per year, making BMNP a better investment. However, the only caveat is that SCHD may have more upside if its constituent stocks jump. Its stock has jumped by 33% in the last five years.
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