Johnson & Johnson (JNJ 0.12%) and UnitedHealth Group (UNH 1.42%) are considered great healthcare stocks to hold for the long term because of their size, steady cash flow, and above-average dividends.

Neither stock has performed particularly well this year, with Johnson & Johnson's shares down more than 9% in 2023 and UnitedHealth's shares down more than 7%. However, we're talking about these companies' long-term prospects. And if you're looking for steady revenue growth and total returns over the long haul, both fit the bill.

The case for UnitedHealth

UnitedHealth is the nation's largest private health insurer, with more than 400,000 employees. It has increased revenue for 11 consecutive quarters and posted double-digit revenue growth in its past five quarters. On April 18, it reported first-quarter revenue of $91.8 billion, up 15% year over year, and net income of $8.1 billion, up 16% over the previous year.

The company operates in two segments. Optum Health, which manages drug benefits and offers value-based data-crunching services while working with more than 100 health plans, had revenue of $54.1 billion, up 25%. UnitedHealthcare, which includes the company's insurance offerings, saw revenue grow 13% to $70.5 billion.

Optum has recently had better growth than UnitedHealthcare and is positioned for more growth, thanks to the company's $5.4 million purchase of home health company LHC Group, which closed in February. LHC focuses on chronically ill or injured patients.

What I like about UnitedHealth Group is that its acquisitions are generally done in a symbiotic way, not just in an add-on fashion. It also recently expanded its reach by adding Medicaid contracts in Indiana and Texas. As the U.S. population ages, UnitedHealthcare's Medicare Advantage offerings should benefit the company; it helps that the Centers for Medicare & Medicaid Services (CMS) boosted revenue for Medicare Advantage plans by 8.5% this year.

Over the past decade, United HealthGroup's total return is up 808% while it has increased annual revenue by 165% and annual earnings per share (EPS) by 285%. That growth has allowed it to raise its dividend by 489% in that period. The quarterly dividend is $1.65 and has increased for 13 consecutive years, though its yield is below average at around 1.35%.

JNJ Revenue (Annual) Chart
JNJ Revenue (Annual) data by YCharts.

The case for Johnson & Johnson

Johnson & Johnson is the largest healthcare company in the world, with 44,000 employees. It can't match the growth of UnitedHealth Group's total return, revenue, or EPS over the last decade, but that's not as important if you plan to hold on to the stock the rest of your life. That's not to say the company hasn't seen growth, as it has increased revenue for seven consecutive years.

What Johnson & Johnson does have that makes it a great forever stock is a superior dividend that it has raised for 61 consecutive years, including a 5.3% boost this year to $1.19 per quarterly share, producing a currently above-average yield of 2.1%. If you never plan to sell the stock, that consistently high dividend will still pay out a nice dividend every quarter.

The other advantage Johnson & Johnson has is its lower volatility. Much of UnitedHealth Group's business now is connected with Medicare Advantage. The problem is that sweeping government reforms or other economic events could radically alter the landscape for UnitedHealth Group's cash cow. During the Great Recession of 2007 and 2008, Johnson & Johnson's shares dropped 12% while UnitedHealth Group's fell nearly 54%.

Johnson & Johnson, on the other hand, has a shot at improving its profitability this year. It just spun off its consumer healthcare segment into a new company, Kenvue (KVUE 2.34%), which went public May 4 with a $3.8 billion initial public offering. The thought was that Johnson & Johnson's pharmaceutical and medtech segments have greater sales and better margins.

In the first quarter, Johnson & Johnson reported revenue of $24.7 billion, up 5.6% year over year. It also reported a quarterly loss of $68 million, thanks to a $6.9 billion litigation charge for talc claims. Its pharmaceutical segment brought in $13.4 billion and medtech was responsible for $7.5 billion, while consumer healthcare had $3.9 billion in revenue.

The company just upgraded guidance to show it expects another year of revenue and EPS growth. Johnson & Johnson said it expects revenue to be between $97.9 billion and $98.9 billion, showing a rise of 6% at the midpoint, and up from earlier guidance figures of between $96.9 billion and $97.9 billion. It also said it expected yearly EPS of between $10.60 and $10.70, up 5% at the midpoint, and an increase from earlier estimates of between $10.45 and $10.65.

Taking the long view

Whether you like UnitedHealth Group or Johnson & Johnson may depend on what your definition of a "forever stock" is. If you take that literally, Johnson & Johnson wins because it's less volatile and has a better dividend. If you never intend to sell the stock, that matters a great deal.

However, if your view of forever is just a decade or two, then UnitedHealth Group is likely to continue to have more growth. And as long as you don't need to sell the stock during a downturn, it will likely have a better total return.