Investors tend to be drawn toward businesses operating in emerging or growing industries, in part, because of their growth potential. But in times of economic uncertainty (and the market volatility that results), the attraction switches to stable businesses, especially for investors trying to maintain their retirement nest egg.

That's where dividend stocks offer a great alternative. While many provide an excellent way to earn a passive regular income in retirement, some dividend stocks are also great options for a diversified portfolio being built to fund a future retirement.

Today, we are going to take a look at two strong dividend stocks that could make great buy-and-hold options until you retire. Both companies have a long history of dividend payouts, and both still have room to grow for years to come.

A pharmacist checks pills in a pharmacy.

Image source: Getty Images.

1. Johnson & Johnson

Healthcare giant Johnson & Johnson (JNJ -0.85%) has a sizable presence in the global market with its popular and innovative products under its consumer and health segments. Its well-known consumer brands include Band-Aid, Listerine, Neutrogena, and Tylenol. And yet the company plans to spin off this segment of its operations by the end of 2023 into a company called Kenvue so it can focus on its core pharmaceutical operations. 

Its pharmaceutical business offers more than enough to help J&J thrive for years to come. This segment produces numerous pharmaceuticals, including some high-quality (and top-performing) immunology and cancer drugs. J&J's pharmaceutical segment alone brought in $52 billion in sales in 2021 (a 14.3% jump from the prior year).

In its recently reported third quarter, the pharma segment accounted for $13.2 billion of the $23.8 billion in total Q3 sales and it was J&J's top-performing segment. Pharmaceuticals grew 2.6% year over year in the third quarter (9% when factoring out tough foreign currency exchange rates), while overall sales were up 1.9% for the quarter (8.1% when excluding exchange rates). On the bottom line, J&J's diluted EPS in Q3 was $1.68, which was up nearly 23% from the prior year.

Johnson & Johnson is a consistent dividend payer, earning the designation as a Dividend King (an S&P 500 company that increased its dividend annually for at least 50 consecutive years). It has a dividend yield of 2.5% and its payout ratio is consistently around 60%, which is quite manageable and suggests some potential to keep growing. In the first quarter, it hiked its quarterly dividend by 6.6% to $1.13 per share, marking its 60th consecutive annual dividend hike.

Amid the market's highs and lows over the past six decades, J&J's dividend payouts have been consistent. As the company continues to evolve (including the upcoming spinoff), it's setting itself up for further growth that it can return to shareholders.

2. Medtronic

Another great dividend stock is medical device manufacturer and distributor Medtronic (MDT -2.48%). It too is a consistently growing dividend stock, although it has only earned Dividend Aristocrat status (an S&P 500 stock with at least 25 years of annual dividend increases). It has 45 straight years of annual increases.

Medtronic is a well-known name in the medical device industry, with four divisions: cardiovascular, medical-surgical, neuroscience, and diabetes. The Ireland-based company operates in 150 countries and treats nearly 70 health conditions.

It has kept its business stable for years, allowing it to pay dividends consistently. Its recent quarterly results were slightly affected because of "slower than predicted procedure volumes," according to the management. Total revenue in the second quarter of fiscal 2023 (which ended Oct. 28) declined 3% year over year to $7.6 billion, while adjusted EPS fell 2% to $1.30. Medtronic management said it expects revenue to pick up pace in the second half of the fiscal year. It ended the quarter with a free cash flow of $1.2 billion which can help fuel its growth strategies this year.

In August, the company increased its quarterly dividend by 8% to $0.68 per share, marking its 45th dividend hike. Medtronic's dividend yields 2.6% and its payout ratio is a relatively high, but still manageable, 81%. The forecasted improvement in the second half of the fiscal year should help lower that payout ratio going forward.

Why both stocks are safe to buy and hold

Both J&J and Medtronic (like the broader markets) have had their ups and downs in individual years, but their overall growth over the past two decades is undeniable. This kind of consistency is important for long-term investors. Though both are stable businesses, they still have plenty of opportunities to grow. 

JNJ Revenue (Annual) Chart

JNJ Revenue (Annual) data by YCharts

Both Medtronic and J&J are also expanding into robotic surgery -- a burgeoning market now that could be a growth catalyst in the coming years. J&J is working on strengthening its medtech (medical technology) segment. J&J is planning to acquire the medical device company Abiomed, which makes heart pumps. Abiomed achieved 22% sales growth in the fiscal year that ended March 31, 2022, coming in at $1 billion. This addition to J&J could boost its medtech revenue in the coming years. 

Medtronic has also launched its own robotic-assisted device, Hugo. Its device recently received the CE mark in Europe, allowing it to be sold in Europe for urologic and gynecologic procedures. It has also received approval to be used for general laparoscopic indications in Canada and approval for urological and gynecological indications in Japan. The device is currently available in the U.S. only for investigational purposes but not for sale. 

In 2022, among the top 10 medical device companies in the world, Medtronic tops the list (as ranked by annual revenue). The company has a number of approved products in a variety of medical fields.

If you check stock performance for these two stocks, Medtronic probably disappoints at the moment. It's trading down about 24% year to date as it's been caught up in the tech selloff this year. J&J is doing a bit better, trading up about 2.7% so far in 2022, compared to the 17.5% drop for the S&P 500 over the same timeframe.

But short-term performance usually isn't a priority for long-term investors, especially when there is a stable dividend added into the mix. The "buy and hold" investment strategy considers the effect of compounding which is why it is wise to buy and hold stocks of stable companies and allow your investments to grow. Though past performance doesn't guarantee the future will be bright, both these companies have a diverse product portfolio with expanding opportunities and a long history of returning cash to shareholders, making them an appealing investment right now.