Right now, consumer discretionary spending is under the microscope, with many companies reporting that their customers are being more budget-conscious. And this uncertainty has bled into the markets, impacting sentiment around stocks closely tied to themes likely to feel the impact of macroeconomic pressure — themes like housing and fashion. This negative sentiment, however, can create investment opportunities when a stock takes a heavy beating.
Sometimes, of course, the market correctly identifies a near-term headwind. That said, it may also price the stock too pessimistically, assuming that headwind will last forever.
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And this brings us to two compelling dividend stock buying opportunities in March. When high-quality businesses get pulled down by temporary constraints, patient investors can often step in and secure meaningful dividend yields at a discount. Two companies fitting this description today are Home Depot(NYSE: HD) and Nike(NYSE: NKE).
Both of these established industry leaders have seen their stock prices take a beating over the last 12 months. But their healthy balance sheets and long history of navigating different markets make them compelling turnaround candidates for investors willing to think long-term.
Image source: Getty Images.
Shares of the home improvement retailer have fallen about 6% over the last 12 months.
Investors have legitimate reasons to be concerned. Sales remain pressured by consumer uncertainty and persistent weakness in the broader housing market, weighed down by interest rates that are far higher than they were five years ago.
This dynamic showed up clearly 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 “ongoing consumer uncertainty and pressure in housing.”
While this is tough for investors to stomach, they should keep in mind that this is a cyclical headwind, not a broken business model. If interest rates come down materially at some point, the housing market could see a significant catalyst.
In the meantime, the company is executing on what it can control, and it even announced a dividend increase in its fourth-quarter update. Further, 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 roughly 65% (the amount of earnings the company is paying out in dividends), Home Depot’s dividend looks well-supported by earnings.
Investors who buy today are essentially getting paid to wait for the macroeconomic environment to shift in Home Depot’s favor. And if history is any indication, it will eventually shift. How much are they getting paid? A solid dividend yield of 2.6%.
Nike’s stock has taken an even harder hit, sliding nearly 27% over the last 12 months.
Like Home Depot, the footwear and apparel giant is navigating a difficult, cautious consumer environment. But Nike is also working through 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 plunged 32% year over year to $0.53.
But Nike is aggressively working on stabilizing its business. While profits remain under pressure, the top line is showing signs of improvement. Nike’s fiscal second-quarter revenue grew 1% year over year to $12.4 billion. This is a huge improvement from its 10% sales decline in fiscal 2025.
“NIKE is in the middle innings of our comeback,” said Nike CEO Elliott Hill 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’re 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 figures out its turnaround, sales could jump sharply.
A successful operational pivot would likely lead to better full-price selling, improved margins, and — probably — significant operational leverage (earnings growing faster than sales).
With that said, investors may already be pricing in the early stages of a successful turnaround, given the stock’s price-to-earnings ratio of 33 as of this writing. But if sales growth accelerates and operational leverage kicks in, earnings could soar. In addition, the company helps make up for some of its valuation risk with a robust dividend yield of about 2.9% at the time of this 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 command robust operating cash flow and have established brands. In addition, this isn’t the first time these companies have navigated difficult economic environments.
Ultimately, I think both stocks are buys today. But investors should keep positions small given the macroeconomic challenges companies are facing. If the macroeconomic environment worsens and their stocks fall further, that could be an opportunity to build a more meaningful position in the two stocks, assuming they can prudently navigate those tougher markets.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot and Nike. The Motley Fool has a disclosure policy.
