Many retail stocks have been pummeled over the last few months as the industry faces increasing online competition and is forced to close more stores. But there are still a few retailers that have built out a moat that should help fend off the competitive pressure from both online and other brick-and-mortar outlets.

Nonetheless, the stocks have been pushed down based on recent results, but these three companies continue to raise their dividends, providing nice yields that are sure to grow in the future. And with the entire industry under pressure, these stocks are poised to outperform as it recovers in time.

Let's take a look at three dividend growth stocks to buy now: Tractor Supply Company (NASDAQ:TSCO), Lowe's (NYSE:LOW), and CVS Health (NYSE:CVS).

Tractor Supply storefront at sunset.

Image source: Tractor Supply Company.

Tractor Supply Company

Tractor Supply Company stock is currently trading at a multiyear low despite steadily improving revenue over the last few years. The culprit was an underwhelming first quarter, which saw earnings per share decline 8% as it faced a tough comparable and weather negatively impacted sales. The stock price fell 8% after the company pre-announced it would miss estimates, and has kept falling ever since.

Management hasn't changed its outlook for full-year 2017, though. It said it expects seasonal merchandise sales to improve in the second quarter, following the uncommonly warm weather in the winter and the cold snap experienced in the Midwest and North during March. Management will provide an update on its outlook with its second-quarter report next month.

With shares currently trading around $53, Tractor Supply stock presents excellent value. The price is just 16.4 times its trailing earnings, which is well below its five-year average multiple of 28.7. On a forward-looking basis, the P/E falls to just 15.5. With the Wall Street consensus estimate for 14.9% average annual EPS growth over the next five years, that gives it a PEG ratio of just over 1.

The bonus is Tractor Supply's dividend now yields close to 2% based on its recent 12.5% dividend increase. What's more, management is committed to growing the dividend, aiming for a 30% payout ratio. (For more, read my full write-up on Tractor Supply Company's dividend potential.)

Lowe's storefront during the day

Image source: Lowe's.


Shares of Lowe's have actually been quite resilient in 2017. In fact, the stock is up about 11% this year, versus just a 9% increase for the S&P 500. Shares saw a big jump earlier this year after Lowe's reported excellent same-store sales growth for the fourth quarter of 2016. Management also provided a better-than-expected outlook for fiscal 2017.

Shares have come down about 8% from the all-time high they hit last month ahead of earnings. But first-quarter results disappointed, as Lowe's suffered from some of the same issues as Tractor Supply Company with regard to its outdoor categories.

Shares now trade around $79, which gives Lowe's a P/E of about 24.8. That's still slightly higher than its five-year average P/E of 23.3, but that earnings multiple has consistently expanded during that time. Looking forward, its price is just 17 times analysts' 2017 EPS expectations. And with 14.5% EPS growth expected over the next five years, it has a PEG ratio of just 1.2.

The dividend now yields about 2.1%, and management plans to raise the dividend 15% to 20% in both 2018 and 2019. That would put its streak of annual dividend increases at 56, so it's very likely it'll keep raising the payout throughout the next decade as well. (Read my full write-up on Lowe's dividend potential for more details.)

CVS shopper receiving help from associate.

Image source: CVS.

CVS Health

OK, CVS is only part retailer. It derives about 60% of its revenue from its pharmacy services segment, but the retail segment generates more operating profit.

CVS has lagged the market since it lost contracts with two major pharmacy benefits managers to rival Walgreens. CVS said it expects to lose more than 40 million retail prescriptions due to the lost contracts. Overall, that represents just over 3% of all the prescriptions CVS filled last year.

While that will weigh on CVS' revenue and earnings growth in 2017, the company looks poised to continue growing beyond this year. Its own pharmacy benefits manager operations provide a solid moat around its retail operations, which is why losing two major contracts is only negatively impacting prescriptions by 3% or so.

Shares currently trade around $78 per share, which is just 16.3 times trailing earnings. That's well below its five-year average P/E of 20. Looking forward, the stock trades for just 13.3 times 2017 earnings expectations. Wall Street expects just 7.9% EPS growth over the next five years, but that includes flat growth in 2017.

The dividend, which CVS has raised for 14 straight years, now yields nearly 2.6%. Management has also committed to consistently raising the dividend payout every year for the foreseeable future. (For more details, read my full write0up on CVS' dividend potential.)

Any of these three retailers would make a great purchase for a dividend growth portfolio right now.