Dividends

A dividend is cash a company pays to its shareholders. BDCs (companies that lend to businesses), REITs (companies that own real estate), and CEFs (professionally managed investment funds) are required by law to pay out most of their income as dividends. That's why they yield 5 to 18%, far more than a typical stock.

When the underlying company pays a dividend, Navy mirrors it. Longs receive USDC. Shorts pay USDC.

How It Works

The protocol does not receive cash from the actual company. Nobody owns the real stock. Dividends are settled as collateral transfers between counterparties.

Longs receive. USDC proportional to your full position size. If you hold 10,000 shares of xARCC and the dividend is $0.48 per share, you receive $4,800 USDC.

Shorts pay. The same amount is deducted from your collateral. Factor dividend obligations into your thesis before opening a short.

The Junior pool covers the gap. If there are more longs than shorts, the Junior tranche ($nRISK) funds the difference. This is one of the costs Junior depositors accept in exchange for outsized yield from trading fees, funding rates, and liquidation penalties.

The Dividend Oracle

Every dividend goes through Validator Consensus before it settles. Validators are independent operators who verify data and run the network.

Step 1. A company files an 8 K with the SEC declaring a dividend. An 8 K is a disclosure that public companies must file when major events happen. The filing hits EDGAR (the SEC's public database of company filings).

Step 2. Each of the 10 validators independently scrapes the filing and extracts three values: the ex date (the cutoff date for who receives the dividend), the dollar amount per share, and the dividend type (ordinary income, capital gain, or return of capital).

Step 3. Validators submit their data to the chain. If at least 8 of 10 agree on all three values, the dividend event is confirmed and scheduled for the ex date block.

Step 4. On the ex date block, three things happen atomically: the oracle (the system that feeds real world price data to the protocol) price drops by the dividend amount, long positions are credited, short positions are debited. Same block. Same transaction.

If a validator submits data that does not match consensus, their staked Points are slashed. The penalty scales with the size of the error.

Accrued Pricing

The Navy price for a synthetic is almost always higher than the stock price you see on Yahoo Finance or CNBC. That is by design.

Navy Price = Market Price + Accrued Dividend.

If ARCC is $20.00 on the NYSE and has accrued $0.45 in dividends since the last ex date, the Navy price is $20.45. You are not overpaying. You are paying for the stock plus the cash already earned inside it.

This is the same "dirty price" model that bond markets use. The dividend accrues into the price every day. If ARCC pays $0.48 per quarter (90 days), the protocol adds roughly $0.005 per day.

The sawtooth pattern. The Navy price slowly drifts above the NYSE price as dividends accrue. On ex dividend date, the accrual resets to zero, the Navy price snaps back down to match the NYSE, and longs receive the dividend (via Auto DRIP or USDC credit). Then the cycle starts again.

The reality bump. When the company files its 8 K and confirms the actual dividend amount, the accrual adjusts to match. If the system estimated $0.45 but the 8 K says $0.50, the Navy price nudges up by $0.05 in one block. An insider buying at $20.49 to catch that bump makes $0.01, which does not cover trading fees.

When the market drops. The accrual keeps climbing even if the stock price falls. If ARCC drops from $20.00 to $18.00 while $0.25 has accrued, the Navy price is $18.25. You earned $0.25 in yield but lost $2.00 in price. The dividend is income, not insurance. At high leverage, a price drop can liquidate you before the next dividend pays out. The Live Breakeven on the dashboard shows exactly how far the price can fall before your yield cushion runs out.

Why this matters. On a regular brokerage, the dividend is invisible to the price until the ex date. An insider could buy the day before, collect the dividend, and sell. On Navy, that same insider has to pay the dirty price, which already includes 99% of the dividend value. There is nothing to capture. The cost to enter equals the value of the upcoming payout.

Oracle Lock

When validators detect an 8 K filing on EDGAR, the protocol enters Oracle Lock. For 5 minutes, no new positions can open and no leverage can increase. This window lets the consensus form without traders front running (trading ahead of public information) the announcement.

The timeline: SEC files 8 K. Validators scrape EDGAR within 60 seconds. Oracle Lock activates. Consensus forms (8 of 10 agree). The dividend event is scheduled for the ex date block, often weeks away. Oracle Lock lifts after 5 minutes.

Existing positions are unaffected. You can close or add collateral during Oracle Lock. You just cannot open new risk.

NAV Consensus

When a company files a 10 Q (quarterly report) or 10 K (annual report) with the SEC, validators independently extract the NAV (Net Asset Value, what the company's real assets are worth per share) from the filing. If 8 of 10 validators agree, the on chain NAV updates atomically. The NAV is used for discount/premium calculations and margin reference pricing.

Validators who submit data that does not match consensus get their staked Points slashed. The penalty scales with the size of the error.

DRIP

Toggle per position. When DRIP is on, dividends automatically buy more of the token. Your position compounds each period. The reinvestment happens in the same block as the dividend credit. Zero slippage.

When DRIP is off, dividends go to your Available Funds as USDC. Withdraw them or use them to open something else.

Dividends on Leverage

Dividends apply to your full position, not just your collateral. Here is a complete example:

You deposit $10,000 and use 3x leverage on a company yielding 12%. Your full position is $30,000. Annual gross dividends: $3,600. Estimated annual funding cost (~5.3%): $1,600. Net dividends after funding: $2,000. That is 20% yield on your $10,000 deposit, compared to 12% without leverage.

A 5x long on a 12% yielder? Your full position is $60,000. Gross dividends: $7,200. Estimated funding cost (~5.3%): $3,200. Net yield on your deposit: $4,000, or 40%.

The funding rate varies based on market conditions. When the market is balanced, funding is cheaper and your net yield is higher. If the position moves against you, losses on the underlying can exceed the dividend income.

Where Dividends Go

Your Available Funds balance on the dashboard. It shows the breakdown: deposited USDC, unclaimed dividends, lending interest, and realized P&L from closed trades.

Withdraw anytime.