Intel's (NASDAQ:INTC) 2.61% dividend yield looks good compared to other large-cap semiconductor companies, and its quarterly payout was raised to $0.24 per share this week, reversing a trend of flat dividend payouts over the past 10 quarters.

Even as things are looking better for Intel on the highly important PC front, the company needs to improve its ability to compete with mobile players like Qualcomm (NASDAQ:QCOM) and Samsung, and drive innovation in other key segments like data centers and the Internet of Things. The semiconductor business is already capital-intensive, and Intel is investing heavily in a more diversified future. But is there actually a significant risk that its dividend will be lowered?

Some background
The personal computer market took a beating in 2013. Sales dropped 10%, a record rate of decline in the segment, and supported the claim that the death of the PC was imminent. Now, it appears that tablet growth may have peaked, and the personal computer market will stabilize. Intel has benefited from the reversal, generating record sales amid smaller macro declines. The company saw its share price rise roughly 41% in the span of a year, nearly tripling growth in the S&P 500 during the period. 

Does Intel's free cash flow support its dividend?
The last quarter saw Intel generate $3.25 billion in free cash flow and return $1.1 billion in dividend payments to shareholders. Intel is aiming to pay out 40% of cash flow in dividends, and last quarter's payout stood at 34%. That might be interpreted as evidence that the company has room to increase its payout, but Intel's cash flow is somewhat irregular due to its product cycles and capital expenditures. Broadening the scope a bit, the company has generated roughly $9.8 billion during the past 12 months, and has paid out roughly $4.5 billion in dividends -- or 45% of cash flow.

Coming in above its payout target doesn't mean the company needs to lower its dividend, but it would appear to make a raise less likely in the short term. Intel's trailing-12-month cash flow is also down roughly $500 million compared to the previous year-long stretch. Again, by itself, this isn't a strong indicator that Intel's dividend isn't secure, but it does paint a picture of slow dividend growth at best.

Intel has historically chosen buybacks over dividend raises
Considering that Intel has only lowered its payment once, it doesn't seem likely that management would push repurchasing so far as to encourage a dividend reduction, but the July authorization for an additional $20 billion in buybacks demonstrates Intel can increase it's dividend -- and it has just recently --, but not much as it funnels cash flow to buybacks.

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It's also worth mentioning that roughly 79% of Intel's business is generated outside the U.S., and dividend payments and share repurchases must be made with domestic assets. As of Sept. 27, Intel reported roughly $15.6 billion in cash and short-term investments, with $12.1 billion in long-term debt. The company's financials are solid, but much of its assets and cash flow comes from overseas, and the tax costs of repatriating assets weakens the argument for a large dividend raise.

The effect of Intel's mobile push on its dividend
Intel's investment to become competitive with mobile players like Qualcomm, Samsung, and ARM Holdings has been a significant drag on the company's bottom line in the last two years. To give an idea of what Intel is up against, Qualcomm is expected to sell 40% of mobile baseband processors this year, and Samsung is building up its semiconductor business.

The last quarter saw Intel's mobile division generate roughly $1 billion in losses on revenue of just $1 million, as it subsidized its line of mobile chips to improve adoption and secure a place in the market. Intel's mobile division has lost $7 billion during the last two years. While that cost is nothing to scoff at, it's a necessary investment for Intel. The company may be cutting back on its subsidies in 2015, as it expects revenues from the mobile segment to improve significantly. Mobile losses are expected to hit $4 billion in 2014, but margins are likely to grow as chip production ramps up, which brightens the outlook for more payout increases eventually. On the other hand, Intel's recently announced plan to combine its PC and mobile units could come with costs that work against raising the dividend.

With solid cash flow and assets, and Intel's history of almost never lowering its payout, the company's dividend looks pretty secure, even with big transitions under way. Intel seems more focused on buybacks as its method of returning value to shareholders, and its dividend yield already compares favorably against Qualcomm at 2.16%, and Taiwan Semiconductor at 1.8%.