Will Overstock (OSTK) increase its digital dividend in 2021?

Summary

  • Overstock introduced digital dividends in 2020.
  • The e-commerce company is an online furniture retailer headquartered in the US.
  • Find out more about the company's performance in this article.

Overstock (NASDAQ:OSTK, OSTK:US), an online furniture retailer in North America, made history last year after distributing 'digital dividends' among its 40 million shareholders on May 19, 2020.

The company issued Digital Voting Series A-1 Preferred Shares (OSTKO security token) as a digital dividend. It was distributed on a 1:10 basis, which means that the company distributed one digital share for every 10 shares of the OSTK stock.

Overstock Investor Relations Director Alexis Callahan had said that the purpose behind introducing digital dividends was to give real value to its shareholders and to boost the adoption of blockchain technology in equity markets.

What is the significance of digital dividends?

OSTKO security token has real value and is equivalent to the Series A-1 preferred stock of the company.

For trading OSTKO token, shareholders can only use tZero, a blockchain-based alternative to traditional brokerage platforms.

Security tokens represent ownership of an asset existing on a blockchain platform. They can be traded or transferred based on the computer code rules of blockchain technology. Notably, OSTKO token is based on Overstock's blockchain platform.

Before the introduction of digital dividend, the company paid cash dividend for three years on this series of preferred shares.

Will Overstock distribute an increased digital dividend this year?

In the first quarter of 2021, Overstock recorded a net revenue of US$ 660 million, up by 94 per cent year-over-year (YoY). Its gross profit was US$ 154 million in the latest quarter, reflecting an increase of 1.41 per cent YoY.

The online furniture retailer's income from continuing operations climbed US$ 40 million YoY to US$ 26 million in Q1 2021, while its active customer base rose 92 per cent YoY to 9.9 million.

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At the time of distributing the digital dividend in May last year, OSTK shares were priced at US$ 17.87 per unit. Since then, the stocks have catapulted by 396 per cent in the last 13 months to close at US$ 88.66 on Tuesday, July 6.

OSTK shares returned 81.3 per cent year-to-date (YTD) and have surged by 60 per cent in the last six months.

Notably, at the end of the first quarter, Overstock had cash and cash equivalents of US$ 535 million. Seeing the company’s overall performance, it can distribute increased digital dividends to retain existing investors and attract new ones in the US and Canada.

The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.

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