U.S. defense contractors are being pulled in two directions as the Pentagon pushes for faster weapons production while investors continue to expect steady dividends and returns, The Wall Street Journal reported Monday.
Executives at RTX (RTX), Lockheed Martin (LMT), Northrop Grumman (NOC) and L3Harris Technologies (LHX) say they are ramping up manufacturing of missiles, rocket components and other systems amid pressure from the Department of Defense to replenish depleted stockpiles. That push has intensified under the Trump administration, as conflicts in Ukraine and the Middle East strain U.S. arsenals.
RTX (RTX) CEO Chris Calio said the company recognizes both the urgency to accelerate deliveries and the frustration within the Pentagon, while also balancing commitments to shareholders. RTX (RTX) plans to spend more than $3 billion this year on capital investments, including missile production, even as it continues dividend payments that totaled $3.6 billion last year.
The administration has signaled it may curb defense contractors’ spending on executive pay, dividends, and buybacks if output does not improve. Donald Trump has publicly criticized RTX’s (RTX) Raytheon unit, warning that suppliers must invest more aggressively in factories and equipment or risk losing Pentagon business.
The pressure comes despite a strong run for the sector. Defense stocks have sharply outperformed the broader market over the past year, and Lockheed Martin (LMT) ended 2025 with a record $194 billion backlog. Lockheed has pledged to dramatically expand production of PAC-3 and THAAD missile interceptors, while L3Harris (LHX) plans to spin off its missile business into a new publicly traded company backed by a $1 billion Pentagon investment.
Not all investments have yet translated into contracts. Northrop Grumman (NOC) said it has expanded missile-part production and invested in future programs, but visibility on major awards remains limited. CFO John Greene said the company will pause share buybacks to prioritize industrial capacity.
Other contractors are also recalibrating. General Dynamics (GD) said it remains committed to dividends, even as buybacks fall out of favor, while Lockheed executives emphasized flexibility as defense spending priorities continue to evolve.