Defense stocks fall after Trump threatens to ban dividends, buybacks

Investing.com -- Lockheed Martin (NYSE: LMT) stock fell 1.7%, Northrop Grumman (NYSE: NOC) dropped 2%, and other defense names were pressured Wednesday afternoon after President Donald Trump threatened to prohibit dividends and stock buybacks for defense companies.

In a post on his social media platform Truth Social, Trump criticized defense contractors for issuing "massive dividends" and conducting stock buybacks "at the expense and detriment of investing in plants and equipment." He declared that this situation "will no longer be allowed or tolerated."

Trump also targeted executive compensation in the defense industry, calling pay packages "exorbitant and unjustifiable" given delivery delays of military equipment. He suggested capping executive pay at $5 million, which he described as "a mere fraction of what they are making now."

The president’s comments specifically addressed what he perceives as slow production and maintenance of military equipment. "I will not permit dividends or stock buybacks for defense companies until such time as these problems are rectified," Trump wrote, adding that defense contractors should use those funds to build equipment rather than "borrowing from financial institutions, or getting the money from your government."

Other major defense contractors including Raytheon Technologies (NYSE: RTX), General Dynamics (NYSE: GD), and L3Harris Technologies (NYSE: LHX) also saw their shares decline following the announcement.

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