Investors often have different goals for stocks in their portfolios; some want growth, some want resilience, and others want dividends. Given Intel Corporation's (INTC 0.02%) attractive 5.1% dividend yield, investors looking for yield might be attracted to the stock.

However, there are many more considerations than just a company's yield. So let's dive into Intel and see if it's worth your investment.

Weakness in a division that should be strong

Intel is no longer focused solely on providing components to the PC market; it's also pursuing data centers as an additional vertical. However, its client computing group (aka consumer PCs) remains its largest segment, and it played a part in Intel's 15% year-over-year non-GAAP revenue decline to $15.3 billion. (Q3 2021 results included a business segment that was spun off.)

Segment Q3 Revenue YOY Growth
Client Computing Group $8.1 billion (17%)
Data Center and AI Group $4.2 billion (27%)
Network and Edge Group $2.3 billion 14%

Source: Intel. Note: Emerging business segments are not included in this table.

Management noted that an industrywide slowdown is affecting its business in both client computing and data centers, but is this true? After all, one of Intel's primary competitors, Advanced Micro Devices, saw its Q3 data center revenue rise 45% year over year, while its client revenue (similar to Intel's Client Computing Group) fell 40%.

Intel is telling one story and its competition is telling another. I think investors should be wary of Intel's Data Center and AI Group's affect on the business, because data centers are still in high demand, as AMD's results reflect. For further proof, the big three cloud computing providers have also discussed ramping up, not slowing down, data center buildouts.

Client computing will always ebb and flow with demand, and it makes sense that this segment is weakening during a time when consumers have less discretionary income due to inflation.

So while sales aren't moving in the right direction, is the dividend in trouble?

Intel has no earnings to pay its dividends

Revenue eventually trickles down to earnings, which a company can pay out as dividends. Obviously, if Intel's revenue shrinks to zero, there will be no money with which to pay dividends. The odds of this happening are low, but investors need to see Intel return to at least a revenue maintenance level, or earnings could take a severe hit.

Earnings per share (EPS) were $0.25, down 85% from last year's level. With a quarterly dividend payment of $0.365 per share, that indicates a payout level of 146%, meaning Intel's earnings don't cover the dividend. However, earnings rise and fall throughout the year, and with fourth-quarter EPS projected to be about a $0.10 loss, Intel's dividend payout source is running dry.

To counteract these falling earnings, Intel announced efforts to reduce operating expenses and the cost of goods sold. Intel expects to save $3 billion in 2023 and $8 billion to $10 billion annually by 2025. For reference, Intel's trailing 12-month cost of goods sold was $37 billion, and operating expenses were $24 billion.

This effort will help save Intel's dividend, but it might not prevent a cut. When a dividend payout ratio rises too high, the business that pays it has to choose whether to reduce the dividend or burn cash to fund it. With Intel's cash and short-term investment balance of $22.5 billion, it could fund its dividends for less than four years before draining its coffers.

It's not advisable to run the balance sheet to zero, so the company will need to get its spending under control to produce tangible profits quickly. But we don't know yet whether Intel can do it, which is why I can't recommend its stock right now despite its juicy dividend.

Stocks only end up with a high dividend yield because of increased risk, which is the situation Intel is in right now. It might make an excellent investment if it can successfully turn the business around. However, Intel's track record has been atrocious: The stock's total return is 67% versus the S&P 500's 230% over the past decade.

Intel has a long way to go before righting the ship, and I won't be personally invested if it does.