It’s a dirty, unglamorous stock. And some would even say the company’s products stink. But, over the years, this stock has continued to offer outstanding returns to investors and traders.

The stock shows no signs of slowing yet… In fact, things may just be heating up, making now a potentially profitable time to get in.

#-ad_banner-#The stock I’m referring to is dividend champion Altria Group (NYSE: MO), best known for its flagship cigarette brand, Marlboro. But the company is far more than just cigarettes. As the parent company of five tobacco corporations, Altria also manufactures and sells the Copenhagen, Skoal, Red Seal, Husky, and Black & Mild tobacco and smokeless tobacco brands.

Specializing in so-called “sin industry” products, Altria also owns a wine business and holds a 27% stake in beer company SABMiller (SBMRY.PK), the world’s second-largest beer brewer by volume, behind only Anheuser-Busch Inbev (NYSE: BUD), according to Bloomberg.

Since smoking has such a negative buzz and many cities enforce anti-smoking by-laws, you’d think Altria would be pining for customers. But, according to the World Health Organization, there are still more than 1 billion tobacco users worldwide. In the United States, nearly a quarter of all adults over 18 still smoke cigarettes. And although 45% of these smokers try to quit every year, only 4%-7% are successful.

Although some may feel it is unethical, Altria has its customers hooked. And with rising cigarette prices and stable material costs plus a stake in the alcoholic beverage market, Altria should remain in a strong growth position for many years to come.

Shares hit an all-time high near $28 during the May 23 trading week. This high occurred shortly after the company announced a quarterly dividend distribution of $0.38, payable on July 11, to shareholders on record as of June 15. This distribution brings the company’s annual forward dividend to around 5.4%, far better than the 10-year Treasury bond rate, currently yielding around 3.1%.

In fact, of the top 30 U.S. consumer goods stocks listed on the New York Stock Exchange, this company has the highest dividend yield of them all. And, it’s one of the top 10 highest dividend-paying stocks on the S&P 500 Index.

Technically, the tobacco king sports a bullish chart. With shares having hit an all-time high this past trading week, now may be a good time get in on the stock before it surges higher.

As shown on the chart, Altria has been in a Major uptrend since rising off its June 2009 low of $14.34. The stock has nearly doubled in the past two years.


 
In June 2009, after testing a level of support near $18.60, Altria formed an accelerated uptrend line. The stock is currently rising well above this line.

Altria also bullishly completed an ascending triangle formation in March 2011 as it surged past old resistance, which has become new support, near $25.44. Since then, then stock has been on a tear, recently hitting its all-time high near $28.

Although a small shelf of resistance has started to form near $27.77, if the stock can break this level, then it could surge since no historical resistance would be in sight.

Fundamentally, Altria shows reasonable growth potential.

In late April, the company reported solid first-quarter results. Although quarterly revenue slipped 2% to $5.6 billion from $5.7 billion in the year-ago period, sales were well ahead of analyst projections of $3.9 billion. The revenue drop was caused by a 6.4% decline in cigarette sales and a 1.3% drop in sales of smokeless tobacco goods. However, wine sales partially offset the loss.

For the upcoming second-quarter, to be reported in June, analysts project revenue will increase 2.6% to $4.5 billion, from $4.3 billion in the year-ago period. For the full 2011 year, analysts expect revenue will increase 1.4% to $17.1 billion, up from $16.9 billion in 2010. By 2012, revenue is expected to rise a further 2.3% to $17.5 billion.

The earnings outlook is also positive. First-quarter earnings were in-line with analyst expectations, but well ahead of management’s forecasts, at $0.44 per share, a 4.8% rise from $0.39 in the year-ago quarter. Despite selling fewer cigarettes during the quarter, the company benefited from lower costs and higher prices.

Since inventory built up during the first-quarter, the company warned earnings growth could be choppy during the remainder of the year. However, analysts still expect second-quarter earnings to rise 6% to $0.53 from $0.50 in the year-ago period.

For the full 2011 year, the company recently reaffirmed its positive guidance, expecting earnings to rise 6-9%, in the range of $2.00-$2.07, compared with $1.90 in 2010. By 2012, analysts project earnings will increase at least another 5.3%, to $2.18.

In addition to moderate growth potential, the company is fairly valued, with a trailing price-to-earnings (P/E) ratio of about 14.4 and a forward P/E ratio of about 12.7. A P/E of 15 or less generally shows good value in this industry.

The company also has an incredible return on equity (ROE) of around 82%. But best of all, Altria boasts an exceptionally high forward annual dividend of about 5.4%. And this dividend is likely to rise over time. Altria has raised its distributions for the past 43 years in a row.

Action to take –> Given that Altria offers an exceptional dividend, is fundamentally solid and shows strong technical growth potential, traders looking to profit may wish to purchase the stock as soon as possible.

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