Sacconaghi: Apple won’t boost its dividend until after April 23

FORTUNE — According to Bernstein Research’s Toni Sacconaghi, Apple’s (AAPL) top brass has been holding “widespread discussions” with key investors to get input on its plans to return more of its $137.1 billion cash hoard to shareholders.

Sacconaghi has been debriefing those investors and now thinks he has a pretty good idea of how Apple’s cash management plans have evolved. In a note to clients Monday he shared his thoughts. Among them:

  • Although many investors were hoping for some kind of announcement in March, or are expecting it to be made next week during Apple’s Q2 earnings report, Sacconaghi believes the two events are too important to be conflated, and that Apple will put at least a couple weeks between the April 23 report and any announcement of new cash management plans.
  • He also believes investors are looking for Apple to return 50% of its free-cash flow to shareholders on an ongoing basis, or about $22 billion a year. (Apple’s current cash-return rate, between stock buybacks and dividends, is $13 billion.)
  • Any cash return program that is smaller, Sacconaghi writes, is likely to disappoint investors, and anything higher would be a positive surprise. The size of the program, he says, could move the stock $30 per share one way or another.
  • To raise that kind of money on an ongoing basis, Apple would either have to 1) dip into its $43 billion U.S. reserves, 2) repatriate (and pay taxes) on some of its $94 billion in overseas holdings, or 3) borrow the cash.
  • Despite earlier remarks by CFO Peter Oppenheimer that Apple was “highly unlikely” to take on debt except for strategic purposes, Sacconaghi thinks Apple’s thinking has evolved, and that at current interest rates the borrowing option is looking increasing attractive.
  • If Apple were to return all of that 50% of free-cash flow in the form of a dividend, he estimates, the yield would be around 4.5%, one of the highest among large cap tech stocks.
  • Sacconaghi believes that a 4.5% dividend would put a floor on Apple’s stock at about $470/share, roughly $40 above Friday’s closing price.

Sacconaghi gives Apple an Outperform rating and a $725 price target.

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