Billions at stake as Trump targets US defense sector dividends, buybacks

• Top defense contractors paid substantial dividends through Q3 2025: RTX ($2.7B), Lockheed Martin ($2.3B), Northrop Grumman ($964M), General Dynamics ($1.19B), and L3Harris ($678M)
• Trump's executive order claims traditional defense contractors have been 'incentivized to prioritize investor returns over the Nation's warfighters' after years of misplaced priorities
• The proposed 2027 military budget increase to $1.5 trillion (66% jump from 2026's $901 billion) helped defense stocks recover from initial losses following the dividend and buyback threat

Trump Targets Defense Sector Dividends and Buybacks

President Donald Trump issued an executive order Wednesday barring U.S. defense contractors from paying dividends and conducting stock buybacks, arguing that companies have "prioritized investor returns over the Nation's warfighters" after "years of misplaced priorities."

Market Impact

Defense stocks initially declined following Trump's announcement but recovered after he proposed increasing the military budget to $1.5 trillion by 2027, up from $901 billion in 2026—a 66% increase.

Companies Affected and Financial Data

Lockheed Martin: Paid $2.3 billion in cumulative dividends through Q3 2025, with quarterly dividends rising 4.8% year-over-year in the first three quarters.

RTX: Distributed $2.7 billion in dividends through Q3 2025, with increases of 7.9% in Q1-Q3 and an estimated 4.7% in Q4.

Northrop Grumman: Paid $964 million in dividends through Q3 2025, posting the highest dividend growth at 12% for Q1-Q3.

L3Harris Technologies: Issued $678 million in cumulative dividends through Q3 2025, with growth rates between 3.4-4.2%.

General Dynamics: Paid $1.19 billion through Q3 2025, with quarterly increases of 5.6% in Q1-Q3.

Boeing: Suspended dividends on commercial jetliners in November 2020.

Implications

The executive order puts billions of dollars at stake for defense contractors and their shareholders. The restrictions represent a significant shift in capital allocation policy for the sector, though the massive proposed budget increase may offset concerns about restricted shareholder returns.