Defense Stocks Tank Then Soar: Here's Why They're Gunning Higher Today

"President Donald Trump rattled the defense sector yesterday by signing an executive order prohibiting contractors from issuing dividends or repurchasing shares until they prioritize investments in new facilities and machinery to boost production speed and quality. He specifically targeted RTX ( ) as the most egregious violator, accusing it of favoring shareholders over military needs and warning it could lose access to future contracts unless it ramps up capital spending."

"Shares of major defense firms dropped sharply in response, with declines of up to 5% during trading. However, after markets closed, Trump advocated for a $1.5 trillion defense budget in 2027, far exceeding the $901 billion allocated for 2026, which propelled after-hours gains and optimism for industry growth. Lockheed Martin (LMT), RTX, and General Dynamics ( ) are the three largest defense contractors and this is what Trump's declarations mean for each."

"Lockheed Martin is the largest defense contractor in the world, with a market capitalization of $115 billion and $73.3 billion in sales. It returned substantial capital to investors over the past two years through dividends and buybacks. In 2024, it paid $3.1 billion in dividends and repurchased $3.7 billion in shares. So far this year, dividends and buybacks totaled $2.3 billion each across the first three quarters."

"Lockheed's stock performance was steady but unspectacular: shares rose 7% in 2024 to close at $486 per share and were virtually unchanged in 2025, ending at around $484 per share. Trump's critique of excessive shareholder returns directly applies here, as Lockheed's consistent buybacks and dividend hikes - marking 30 years of payments and 23 consecutive years of increases - could face restrictions until it demonstrates expanded production capacity."

An executive order bars defense contractors from issuing dividends or repurchasing shares until they prioritize investments in new facilities and machinery to improve production speed and quality. RTX was singled out as the most egregious violator and warned it could lose access to future contracts unless it increases capital spending. Major defense stocks fell as much as 5% intra-day, then rallied after Trump advocated a $1.5 trillion defense budget for 2027 versus $901 billion for 2026. Lockheed Martin, the largest contractor with $115 billion market cap and $73.3 billion sales, has returned substantial capital through dividends and buybacks.

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