What separates Intel from the pack, even more than its sector-leading yield of 4.1%, is a degree of capital-allocation maturity that I think provides genuine appeal for income-oriented investors. Most of its resources are reinvested back into the business, keeping its competitive position as strong as possible and financing continued long-term growth potential. Other than its 2011 purchase of security software firm McAfee, it hasn't spent much on acquisitions. Intel's cash reserves ($13.6 billion at June 30) are appropriate for its size, cyclicality and capital intensity. The company has bought back a lot of stock--diluted shares outstanding has fallen more than 20% since 2002, though it's hard to argue that most of these purchases have been made at value-creating prices. Fortunately, the mix of shareholder cash returns is now tilted more toward dividends, and more recent repurchases have been financed in part with very low-cost debt (which now totals about $7 billion).

We think Intel's business is likely to prove far more durable than its detractors believe. Yes, the growth of PCs has slowed, but shipments are still poised for long-term growth in emerging markets. Intel dominates the computer processor market, with only occasional competitive volleys from Advanced Micro Devices AMD. We think its economic moat is wide and stable, helping preserve high returns on capital over the course of industry cycles. The company has lagged behind rival ARM Holdings ARMH in mobile devices (smartphones and tablets like Apple's iPad), because it has historically focused more on performance than power consumption. But even as these devices capture a larger share of the broader computing business, they effectively outsource most of the tough stuff to servers--an area where Intel's profit margins are even higher, and its competitive domination is even more complete. (In any event, I can't imagine runningDividendInvestor from my iPad--there are functions that PCs will have to perform for a long time to come.) Meanwhile, Intel is investing in its Atom line of power-efficient chips for mobile devices; we haven't incorporated much benefit in our fair value estimate, but the possibility of success in this area provides a more-or-less free source of upside.These are all highly cyclical lines of business, of course, where downturns result in excess manufacturing capacity, pricing pressure and tumbling margins. The cycle may well be turning south right now as developing markets feel more global economic pressure and PC sales feel the heat. Intel's stock is sitting near a 52-week low, 26% off the high it reached earlier this year.