President Donald Trump said he would move to block U.S. defense contractors from paying dividends or repurchasing shares unless they significantly increase spending on manufacturing capacity and research, remarks that sent shares of major arms makers lower.
In a social media post Wednesday, Trump also called for sharp limits on executive compensation at defense companies, saying pay should be capped at $5 million until firms construct what he described as “NEW and MODERN Production Plants.” He argued that contractors are failing to produce and maintain military equipment quickly enough.
Defense companies “are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment,” Trump wrote. “This situation will no longer be allowed or tolerated!”
The comments weighed on the sector in afternoon trading. Shares of Northrop Grumman (NOC) fell as much as 3%, while Lockheed Martin (LMT), RTX (RTX) and General Dynamics (GD) also declined.
Spokespeople for RTX, Northrop Grumman and Lockheed Martin did not immediately respond to requests for comment.
Public filings show that executive pay at the companies Trump singled out far exceeds the level he proposed. Northrop Grumman Chief Executive Kathy Warden earned total compensation of about $24 million in 2024, including a base salary of $1.79 million. Lockheed Martin Chief Executive Jim Taiclet received roughly $23.75 million in total pay, with a base salary of $1.75 million.
Trump did not spell out how the restrictions would be enforced, though people familiar with the matter have said he has been considering an executive order. His post echoed comments he made in late December, when he said he planned to meet with top defense executives to push them to redirect capital away from buybacks, dividends and executive compensation and toward development and production.
The criticism fits a broader theme of the Trump administration’s approach to the defense industry. In November, Defense Secretary Pete Hegseth criticized what he described as a slow and inefficient procurement system, arguing that weapons programs are often over budget, delivered years late and sometimes outdated by the time they reach the field.
He urged major contractors to invest their own funds to accelerate output, comments delivered to an audience that included executives from Lockheed Martin (LMT) and Northrop Grumman (NOC).
Scrutiny of defense industry profits predates the current administration. In February 2024, then-Navy Secretary Carlos Del Toro told industry leaders that “overall, many of you are making record profits, as evidenced by your quarterly financial statements,” highlighting long-running tensions between Pentagon officials and contractors over spending priorities.