Key Points
Home Depot is a solid dividend stock that can profit off a housing recovery.
JD.com is growing revenue at double-digit rates while paying a high yield.
10 stocks we like better than Home Depot ›
It’s nice to see regular cash deposited in your account. Profitable companies with solid competitive positions in their industry can pay passive income for years, but the best dividend stocks are those with a near-term catalyst or cheap valuation that offer share price upside on top of an above-average yield. Here are two undervalued dividend stocks to consider buying right now.
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1. Home Depot
Despite a slow housing market and elevated interest rates, shares of Home Depot (NYSE: HD) have performed well in the past few years, currently up 23% since 2022. This is the largest home improvement retailer, with $162 billion in trailing-12-month revenue. It’s got the financial fortitude to maintain steady dividend payments, with the prospect of lower interest rates over the next year potentially sending the stock higher.
Home Depot has reported weak sales, which is not surprising. Higher interest rates are making financing home projects more expensive. But even in this murky home improvement market, Home Depot reported just a 0.3% decrease in comparable-store sales last quarter, while U.S. comp sales increased 0.2% year over year. Its top competitor, Lowe’s, fared worse, reporting a comp sales decline of 1.7% in Q1, indicating superior competitive positioning for Home Depot.
Analysts expect the company’s earnings per share to come in at $15.01 for the full year. This is more than enough to cover the dividend. Home Depot increased its quarterly dividend last year to $2.30, bringing its forward dividend yield to 2.44%.
Home Depot continues to invest to please customers and win more wallet share in a $1 trillion addressable market. It is investing in employee training to give workers the tools to provide more product knowledge to customers. It is also mitigating tariff risks by diversifying its supply chain so that no single country makes up more than 10% of its sourcing.
The housing market could be in a strong recovery by this time next year. The market is currently expecting the Federal Reserve to start cutting interest rates as early as September, with the probability of a rate cut increasing to 94% by December. Lower interest rates would take the lid off the housing market, and Home Depot stock could surge higher.
2. JD.com
Some investors may not be familiar with JD.com (NASDAQ: JD), but it’s one of the leading e-commerce companies in China. It offers a wide range of products, and it also provides a platform for third-party merchants to sell their goods. After a sluggish few years for China’s economy, the stock is dirt cheap, trading at a low price-to-earnings multiple and offering a dividend yield close to 3%.
JD.com has grown its revenue at an annualized rate of 15% since 2019. Revenue grew nearly 16% year over year in Q1 2025. The business benefits from sourcing merchandise in high volume, which allows it to secure goods at low prices that it passes on to consumers. It has over 32 million square meters of warehouse space, giving it wide coverage of China’s population.
Growing revenue and earnings are leading the company to pay higher dividends. The company paid out $1.00 per share to shareholders in April, bringing the trailing yield to 2.94%. While it only pays out a dividend once a year, management is committed to returning capital to shareholders.
Keep in mind, the dividend can go up or down each year at the discretion of the board of directors. The company paid out $1.26 in 2022, $0.62 in 2023, and $0.76 in 2024. However, there is good reason to believe its recent streak of growing the dividend will continue.
The recent increases reflect the improving margins in the business. JD.com’s operating margin has improved from 2.6% in Q4 2023 to 4.9% in Q1 2025. Since management is focusing on scaling the business and improving margins, investors should expect the company’s earnings and annual dividend to grow over time.
With the company continuing to post solid sales, the economy seems on the verge of a recovery. The stock is trading at a forward price-to-earnings ratio of 12, which could lead to substantial upside for shareholders over the next year on top of next year’s dividend.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot. The Motley Fool recommends JD.com and Lowe’s Companies. The Motley Fool has a disclosure policy.
