Are there any covenants or restrictions associated with the cumulative perpetual preferred stock that could affect future dividend payments? | STRR (Aug 08, 2025) | Candlesense
STRR

Are there any covenants or restrictions associated with the cumulative perpetual preferred stock that could affect future dividend payments?

Short answer:

The press release you referenced does not mention any specific covenants, restrictions, or conditions attached to the 10% Series A Cumulative Perpetual Preferred Stock that would limit or otherwise affect future dividend payments. Consequently, based solely on the information provided, there is no indication that any such provisions exist.

Why the news release doesn’t reveal any covenants or restrictions

Element in the release What is disclosed What is not disclosed
Dividend amount $0.225 per share (partial cash dividend) Any limits on how much can be paid in the future
Dividend period Covered through August 21 2025 Whether the dividend is mandatory, discretionary, or subject to other tests
Stock description “10% Series A Cumulative Perpetual Preferred Stock” Any protective covenants (e.g., debt‑to‑equity ratios, cash‑flow tests, redemption rights, or dividend‑deferral provisions)
Corporate actions None beyond the dividend declaration Any restrictions on issuance of additional preferred shares, convertible features, or voting rights that could impact cash flow

The release is essentially a declaration of a current dividend and a brief description of the security class. Press releases of this type typically focus on the immediate financial event (the dividend) rather than the detailed terms of the securities. Those terms are normally found in the certificate of designation, the indenture, or the prospectus filed with the SEC (e.g., Form S‑1, S‑3, 424B2, etc.).

What “Cumulative Perpetual Preferred Stock” normally means (general industry practice)

While the news article does not spell out any covenants, it helps to understand the standard characteristics of the security class mentioned. This background can guide you on what to look for in the formal governing documents:

Feature Typical meaning Potential impact on future dividends
Cumulative Unpaid dividends accrue and must be paid before any common‑stock dividends. Provides a strong incentive for the company to eventually pay any missed dividends, but does not guarantee that future dividends will be paid on schedule.
Perpetual No scheduled maturity date; the preferred shares remain outstanding indefinitely unless the issuer redeems them (if a redemption feature exists). The company may continue paying dividends indefinitely, but it also means the obligation could linger even if cash flow tightens.
10% Series A The “10%” typically reflects the fixed dividend rate based on the stated par value (e.g., 10% of $1,000 = $100 annual dividend). If the company’s cash flow or earnings decline, the board may elect to defer the dividend (if allowed) despite the stated rate, though accumulated arrears would still exist.
Preferred stock seniority Preferred dividends are paid before any common‑stock dividends; they are also senior to common equity in liquidation. In distressed scenarios, preferred shareholders are more protected than common shareholders, but still subordinate to secured debt.

These conventions do not automatically impose covenants, but many issuers add protective covenants into the preferred‑stock agreement to protect the investors’ interests (e.g., limitations on incurring additional debt, limits on dividend payments to common shareholders, cash‑flow tests, or redemption restrictions). Whether Star Equity Holdings has added any of those is a matter of reviewing its formal filing.

Where to find the definitive answer

  1. Certificate of Designation / Indenture – The legal document that establishes the rights, preferences, and restrictions of the Series A Preferred Stock. It will list any covenants such as:

    • Financial‑test covenants (e.g., maintaining a minimum net worth, debt‑to‑EBITDA ratio).
    • Dividend‑restriction covenants (e.g., “the Company shall not omit or defer any dividend on the Preferred Stock unless the Board determines that such omission is in the best interest of the Company”).
    • Redemption or call provisions (e.g., the company may redeem the shares at a predetermined price after a certain date).

  2. Form 10‑K / 10‑Q – The annual and quarterly reports often contain a “Liquidity and Capital Resources” section that references any outstanding preferred‑stock covenants.

  3. SEC filings related to the preferred‑stock issuance – If the shares were issued via a private placement, you may see the terms in a Form D or a registration statement (e.g., S‑1 or S‑3). The “Item 9 – Determination of Shareholder Rights” in a proxy statement can also disclose dividend‑related rights.

  4. Company’s Investor Relations website – Many issuers post the PDF of the preferred‑stock prospectus or a summary of the terms for easy access.

Practical steps you can take right now

Step How to do it
1. Search the SEC’s EDGAR database for “Star Equity Holdings Inc.” and filter by “Series A Cumulative Perpetual Preferred Stock” or “10% Series A”. Look for the most recent Form S‑1, 424B2, 10‑K, 10‑Q, or 8‑K that mentions the preferred stock.
2. Locate the “Certificate of Designation” (usually attached as an exhibit). Review the “Protective Provisions” and “Dividend Rights” sections.
3. Review recent 10‑K/10‑Q filings (especially the “Liquidity and Capital Resources” and “Management’s Discussion and Analysis” sections) for any mention of covenant compliance or covenant breaches.
4. Contact Investor Relations if the documents are not publicly available. They can typically provide a copy of the preferred‑stock agreement or a summary of key covenants.
5. Monitor future press releases – Companies often disclose any covenant breaches or modifications when they arise (e.g., a waiver of a financial‑test covenant).

Bottom line

  • Based solely on the provided news release: No covenants or restrictions are identified, so we cannot say definitively that any exist.
  • To determine definitively whether any covenants or restrictions could affect future dividend payments, you must examine the formal governing documents (Certificate of Designation, indenture, and related SEC filings). These will spell out any financial‑test covenants, dividend‑deferral rights, redemption terms, or other protective provisions that could limit or condition dividend payments.
  • Until those documents are reviewed, the safest conclusion is that the news release does not reveal any such covenants, but you should verify by consulting the official filing documents.

Other Questions About This News

Could the dividend signal management's confidence in future earnings, and what does that imply for the stock's growth prospects? How might the dividend coverage period through August 21, 2025 affect the valuation of the preferred stock and its market demand? What is the market's perception of the 10% Series A Cumulative Perpetual Preferred Stock and its yield relative to similar preferred securities? How does this dividend declaration compare to Star Equity Holdings' historical dividend policy and to its peers in the sector? Will the dividend announcement affect the supply and demand dynamics for the Series A preferred shares versus common shares? What are the tax implications for investors receiving this cash dividend and how might that influence buying or selling activity? Will the dividend payout impact the company's cash flow and liquidity position in the short term? How will the partial cash dividend of $0.225 per share affect the market price of STRR's common stock? What is the expected impact of this dividend on the overall yield and total return expectations for current and prospective shareholders?