Dubbed the “Bividend” by BTCS, the company said it will pay a dividend of five cents per share in bitcoin to its investors based on the price of bitcoin on the ex-dividend date of March 16. Shareholders would be paid on March 17. If preferred, they have the option to receive the dividend in cash instead.
Following the announcement, shares of BTCS jumped on Wednesday. The stock was up nearly 44% by close.
However, financial experts warn not to buy a stock based on the hype surrounding it or its dividend.
“If you want to own that company, then own that company,” Ivory Johnson, certified financial planner, chartered financial consultant and founder of Delancey Wealth Management, tells CNBC Make It. “But if you want to buy bitcoin, then buy bitcoin. Don’t buy this to get bitcoin.”
When buying any stock, your decision should be based on the fundamentals of the company itself, he says.
Though Douglas Boneparth, certified financial planner and president of Bone Fide Wealth, thinks the bitcoin dividend is “cool,” he agrees with Johnson that it isn’t a reason to buy the stock.
“Learn more because you’re primarily investing in the company and its future cash flows,” Boneparth, who has invested in bitcoin since 2014, tells CNBC Make It.
Though he thinks the “Bividend” is a “really neat bridge” to direct ownership of bitcoin, “jumping in there just because this is happening is jumping in on a feature, not necessarily the product,” he says. “You’d still approach this as you would any other any investment.”
In addition, shareholders would need to complete a few more steps, including filling out a form with the U.S. Securities and Exchange Commission (SEC), which would require disclosure of their name, Social Security number and bitcoin wallet address.
Ultimately, the “Bividend” itself “should not spark interest” for investors, Johnson says.
Overall, financial experts deem cryptocurrencies like bitcoin to be very risky, speculative and volatile assets. Regardless of whether you invest in bitcoin directly or indirectly through another means, experts recommend to only invest what you can afford to lose.
Financial experts also warn against trying to pick stocks and time the market. It’s risky and generally not a reliable way to build wealth. It’s extremely difficult to pick stocks that will outperform the market, and even harder to do so consistently over time.
All in all, “you should not buy a stock because they’re giving a dividend in bitcoin,” Johnson says.