President Donald Trump on Wednesday dramatically raised the stakes in his confrontation with the U.S. defense industry, warning that major military contractors will be barred from issuing dividends or conducting stock buybacks until they significantly accelerate weapons production, expand manufacturing capacity, and fix what he described as persistent failures in equipment maintenance and delivery.
In a lengthy and unusually blunt post on his Truth Social platform, Trump accused defense companies of putting shareholder returns and executive compensation ahead of national security priorities. He argued that capital currently being paid out to investors should instead be redirected into new factories, machinery, and supply chains capable of meeting rising military demand.
“Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly,” Trump wrote.
He added that “massive” dividends and share repurchases were taking place “at the expense and detriment of investing in Plants and Equipment.”
The president also took aim at executive pay, calling compensation packages at major contractors “exorbitant and unjustifiable.” Until companies invest in new production plants, Trump said, “no Executive should be allowed to make in excess of $5 Million Dollars,” effectively proposing a cap on top management pay linked directly to industrial expansion.
Markets reacted swiftly to the remarks, underscoring investor unease about political intervention in corporate financial decisions. Shares of General Dynamics, Lockheed Martin, and Northrop Grumman each fell about 3% following Trump’s post, wiping billions of dollars off their combined market capitalization.
Trump later singled out Raytheon, accusing the company of being “the least responsive to the needs of the Department of War, the slowest in increasing their volume, and the most aggressive spending on their Shareholders rather than the needs and demands of the United States Military.” He warned that the Pentagon would sever business ties with Raytheon unless it sharply increases investment in plants and equipment, and said that “under no circumstances” should the company carry out any further stock buybacks in the interim.
That warning triggered another sell-off. Shares of RTX, Raytheon’s parent company, slid an additional 2% in after-hours trading after closing down 2.5%. RTX is a cornerstone of the U.S. defense industrial base, manufacturing advanced air-to-air missiles and key components for the F-35 fighter jet, making it deeply embedded in both U.S. and allied military programmes.
Trump framed his intervention as a reallocation of existing resources rather than a call for more government spending. Military equipment, he said, “must be built now with the Dividends, Stock Buybacks, and Over Compensation of Executives, rather than borrowing from Financial Institutions, or getting the money from your Government.” He ended the post with a stark warning to the industry to “BEWARE,” signaling that further action could follow if companies fail to comply.
The legal and practical impact of Trump’s announcement remains unclear. It was not immediately evident whether the restrictions he outlined would be enforced through executive orders, changes to Pentagon contracting rules, or legislation. The White House did not immediately respond to requests for clarification, leaving defense firms and investors uncertain about the scope, timing, and enforceability of the proposed measures.
The comments come at a sensitive moment for the defense sector. U.S. and allied militaries have been drawing down stockpiles of missiles, ammunition, and other equipment amid ongoing global conflicts, exposing limits in production capacity built for peacetime demand. Contractors have repeatedly pointed to supply chain disruptions, shortages of skilled labor, and the long lead times required for specialized components as obstacles to rapidly scaling output.
Trump’s remarks suggest growing impatience with those explanations and a willingness to apply direct pressure on contractors’ balance sheets. His focus on buybacks and dividends taps into a broader debate in Washington over whether defense companies have prioritized financial engineering over long-term industrial investment.
Recent disclosures highlight the scale of shareholder payouts in the sector. Northrop Grumman spent $1.17 billion on stock buybacks in the nine months ended September 30 and paid $964 million in dividends over the same period. Lockheed Martin repurchased $2.25 billion of its own shares in the nine months ended September 28, alongside $2.33 billion in dividend payments.
While such payouts are common across corporate America, Trump’s intervention introduces a new layer of political risk for an industry that has historically enjoyed stable, if closely scrutinized, relations with Washington. Any sustained restrictions on dividends, buybacks, or executive pay could force defense companies to rethink their capital allocation strategies, potentially shifting more cash toward factories, tooling, and workforce expansion.
The episode, for investors, raises questions about how defense stocks should be valued in an environment where shareholder returns could be subordinated to strategic and political priorities. For the companies themselves, Trump’s warning signals that production speed and industrial capacity may now carry consequences that extend well beyond contract awards, reaching deep into boardroom decisions on pay and capital returns.
However, the sharp market reaction suggests it is being taken seriously, and it underscores a clear message from the White House: faster weapons production and expanded manufacturing capacity are no longer just contractual expectations, but conditions that could determine how freely defense companies are allowed to reward their shareholders and executives.
