Right now, consumer discretionary spending is under the microscope, with many companies reporting that their customers are becoming more budget conscious. And this uncertainty has spread to markets, affecting sentiment around stocks closely linked to issues that are likely to feel the impact of macroeconomic pressure: issues like housing and fashion. However, this negative sentiment can create investment opportunities when a stock takes a beating.
Sometimes, of course, the market correctly identifies a short-term headwind. That said, you can also price the stock too bearishly, assuming the headwinds last forever.
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And this brings us to two compelling opportunities to buy dividend stocks in March. When high-quality companies are sunk by temporary constraints, patient investors can often step in and secure significant dividend yields at a discount. Two companies that today fit this description are house deposit(NYSE: HD) and Nike(NYSE: NKE).
These two established industry leaders have seen their share prices take a beating over the past 12 months. But their healthy balance sheets and long history of navigating different markets make them compelling candidates for a turnaround for investors willing to think long-term.
Image source: Getty Images.
Shares of the home improvement retailer have fallen about 6% over the past 12 months.
Investors have legitimate reasons to worry. Sales remain pressured by consumer uncertainty and persistent weakness in the broader housing market, weighed down by interest rates that are much higher than five years ago.
This dynamic was clearly on display in the company’s fiscal 2025 fourth-quarter results. The company’s fourth-quarter sales fell 3.8% year over year to $38.2 billion.
The results, Home Depot CEO Ted Decker said in the company’s fourth-quarter earnings release, reflected “continued consumer uncertainty and pressure on the housing sector.”
While this is difficult for investors to swallow, they should keep in mind that this is a cyclical hurdle, not a failed business model. If interest rates drop substantially at some point, the housing market could see a major catalyst.
In the meantime, the company is executing what it can control and even announced a dividend increase in its fourth-quarter update. Additionally, it’s worth noting that Home Depot’s dividend this month will mark the company’s 156th consecutive quarterly dividend.
And with a payout ratio of about 65% (the amount of earnings the company is paying out in dividends), Home Depot’s dividend appears to be well supported by earnings.
Investors who buy today are essentially being paid to wait for the macroeconomic environment to change in Home Depot’s favor. And if history is any indication, over time it will change. How much do they pay them? A solid dividend yield of 2.6%.
Nike stock has taken an even harder hit, falling nearly 27% over the past 12 months.
Like Home Depot, the footwear and apparel giant is experiencing a difficult and cautious consumer environment. But Nike is also working on its own internal turnaround efforts, which have compounded the market’s pessimism.
Highlighting the pressure on the business, Nike’s fiscal second-quarter earnings per share fell 32% year over year to $0.53.
But Nike is working aggressively to stabilize its business. While profits remain under pressure, revenue is showing signs of improvement. Nike’s fiscal second-quarter revenue grew 1% year over year to $12.4 billion. This is a big improvement from its 10% drop in sales in fiscal 2025.
“NIKE is halfway through our comeback,” Nike CEO Elliott Hill said in the company’s most recent earnings release. “We are making progress in the areas we prioritized first and remain confident in the actions we are taking to drive the long-term growth and profitability of our brands.”
Still, investors should not underestimate the durability of this brand. Nike’s global appeal remains a powerful structural advantage. If Nike can recover, sales could increase dramatically.
A successful operational turnaround would likely lead to better full-price sales, better margins, and probably significant operating leverage (profits growing faster than sales).
That said, investors may already be pricing in the early stages of a successful recovery, given the stock’s price-to-earnings ratio of 33 at the time of writing. But if sales growth accelerates and operating leverage kicks in, profits could soar. Additionally, the company helps offset some of its valuation risk with a solid dividend yield of around 2.9% at the time of writing.
When navigating an uncertain market, one of the best filters is to look for established companies with the financial strength to weather a downturn.
Both Home Depot and Nike have strong operating cash flow and have established brands. Furthermore, this is not the first time these companies have experienced difficult economic environments.
Ultimately, I think both stocks can be bought today. But investors should keep positions small given the macroeconomic challenges companies face. If the macroeconomic environment worsens and their shares fall further, that could be an opportunity to build a more significant position in the two stocks, assuming they can navigate those more difficult markets prudently.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions and recommends Home Depot and Nike. The Motley Fool has a disclosure policy.
Here Are My Top 2 Dividend Stocks to Buy in March Originally Posted by The Motley Fool
