As the world's largest semiconductor producer, tech giant Intel (NASDAQ:INTC) has a vested interest in tapping into the Internet of Things (IoT), particularly given the tepid growth outlook for some of its major revenue drivers. Although predictions of the potential financial opportunity in the IoT can get ridiculous rather quickly, let's explore Intel's plans to benefit in this growing area.

Intel and the IoT

Intel's IoT segment designs and produces chips for a host of communications uses, including retail, transportation, industrial, video, real estate, and smart-city applications. It's also been Intel's fastest-growing segment in terms of revenue over the past two fiscal years. The IoT business increased sales 16% in 2016 and 9% in 2015.

However, Intel generates only a small amount of its total revenue from the IoT. In fact, the company's client computing group (CCG), which makes chips for PCs, and its data-center group, which produces data-center semis, accounted for $50.1 billion, or 85%, of Intel's $59.3 billion in fiscal 2016 sales. By contrast, Intel's IoT group produced $2.6 billion, or 4% of the semiconductor behemoth's total sales last year. But Intel expects CCG sales to continue to decline a bit in the coming years, and it believes growth from segments such as the IoT will help counteract those declines. The company expects its IoT total addressable market to grow to around $30 billion in potential sales by 2021 -- and that only scratches the surface of Intel's additional growth opportunities.     

A worker holds up a semiconductor.

Image source: Getty Images.

But is Intel a buy?

Intel's top-line growth outlook is perhaps the company's single largest issue. Declining PC sales are expected to place pressure on Intel's CCG unit, and the company hopes to buoy its growth by doubling down on long-term growth markets such as the IoT, self-driving cars, and artificial intelligence. But these markets will take years to fully mature. That's why the Wall Street consensus calls for Intel to increase its sales just 1.2% this year and 2.5% next year. 

For its part, the company intends to grow profits faster than sales, and EPS faster than profits. It doesn't seem unrealistic that Intel can grow its EPS in the high-single-digit range, and in fact, the average sell-side analyst estimate sees Intel expanding its per-share earnings at an average annual rate of 8.5% over the next five years. That makes Intel a potentially good buy for investors seeking stability and income from their holdings.

Shares trade at just 15 times trailing-12-month earnings, a significant discount from the S&P 500, whose P/E of 26 sits well above its historical averages. 

Then there's the dividend. Intel shares currently yield 3%, which also stands well above the S&P 500's 1.9%. It's paid a dividend since 1993, and while it hasn't increased its payout at the annual intervals many investors seek, it's still gone up at a compound average rate of 17% per annum. 

Overall, Intel is much more than an IoT play. But its exposure to this major tech trend will become increasingly prominent in the years to come. That makes it a stock that can give investors seeking stability and income exactly what they're looking for.

Andrew Tonner has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool has a disclosure policy.