Trump Halts Defense Company Stock Buybacks Pending Performance Improvements

On Wednesday, President Donald Trump took a significant step by signing an executive order aimed at the defense industry. This order prohibits defense companies from paying dividends or repurchasing their stock until they demonstrate improved production and delivery performance.

The executive order states, “Effective immediately, they are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget.”

Both Trump and the Pentagon have expressed concerns over the defense sector, citing high costs and sluggish production rates. The administration is committed to implementing changes that will enhance the production of military equipment.

“I am committed to ensuring that the United States military possesses the most lethal warfighting capabilities in the world,” the order emphasizes. “Our Nation can only be at peace if we maintain strength. The performance of America’s defense industrial base is critical to this capacity. After years of misplaced priorities, traditional defense contractors have been incentivized to prioritize investor returns over the Nation’s warfighters.”

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President Donald Trump signed an executive order blocking defense companies from paying dividends or buying back stock until they improve performance. ( Yuri Gripas/Abaca/Bloomberg via Getty Images / Getty Images)

The order further states, “While the United States produces the best military equipment in the world, we do not make enough of it quickly enough to meet the needs of our military and our partners.” It emphasizes the necessity for defense contractors to adhere to the highest standards to safeguard national interests, particularly regarding the timeliness and quality of defense items delivered.

Earlier on the same day, Trump shared similar sentiments on Truth Social, mentioning that he had been informed by the Department of War that Raytheon, a major defense contractor, has been the least responsive to the department’s needs.

Raytheon is a subsidiary of the defense contractor RTX.

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President Donald Trump and the Pentagon have criticized the defense industry for what they describe as high costs and slow production. (Getty Images / Getty Images)

Following Trump’s statements, defense stocks experienced a decline, reversing recent gains that had come after the U.S. military’s use of military equipment in operations against Venezuela, including the capture of President Nicolás Maduro and his wife.

During afternoon trading in New York, shares of defense giant Lockheed Martin fell by 4.8%, Northrop Grumman slid 5.5%, and General Dynamics dropped 3.6%. RTX shares initially decreased by 2% but later recovered, climbing 2.5% in after-hours trading.

According to the executive order, within 30 days, Pentagon chief Pete Hegseth will identify underperforming defense contractors that have engaged in stock buybacks. Hegseth will then engage with these companies, allowing them to submit a remediation plan for Pentagon review within 15 days of notification.

If Hegseth finds the remediation plan inadequate, further actions may be taken to secure remedies, including enforcement actions.

Pentagon chief Pete Hegseth will identify defense contractors who are underperforming on their contracts that have engaged in stock buybacks. (Getty Images / Getty Images)

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Within two months, Hegseth is tasked with ensuring that any future defense contracts include provisions that ban stock buybacks for underperforming firms. Additionally, the Secretary will ensure that executive compensation for contractors is not linked to short-term financial metrics, such as free cash flow or earnings per share driven by stock buybacks, but rather to on-time delivery.

The order also directs the U.S. Securities and Exchange Commission to consider regulations to implement these proposed restrictions.

Reuters contributed to this report.

On Wednesday, President Donald Trump took a significant step by signing an executive order aimed at the defense industry. This order prohibits defense companies from paying dividends or repurchasing their stock until they demonstrate improved production and delivery performance.

The executive order states, “Effective immediately, they are not permitted in any way, shape, or form to pay dividends or buy back stock, until such time as they are able to produce a superior product, on time and on budget.”

Both Trump and the Pentagon have expressed concerns over the defense sector, citing high costs and sluggish production rates. The administration is committed to implementing changes that will enhance the production of military equipment.

“I am committed to ensuring that the United States military possesses the most lethal warfighting capabilities in the world,” the order emphasizes. “Our Nation can only be at peace if we maintain strength. The performance of America’s defense industrial base is critical to this capacity. After years of misplaced priorities, traditional defense contractors have been incentivized to prioritize investor returns over the Nation’s warfighters.”

BOEING SECURES $8.6B CONTRACT TO BUILD FIGHTER JETS FOR ISRAEL’S AIR FORCE

President Donald Trump signed an executive order blocking defense companies from paying dividends or buying back stock until they improve performance. ( Yuri Gripas/Abaca/Bloomberg via Getty Images / Getty Images)

The order further states, “While the United States produces the best military equipment in the world, we do not make enough of it quickly enough to meet the needs of our military and our partners.” It emphasizes the necessity for defense contractors to adhere to the highest standards to safeguard national interests, particularly regarding the timeliness and quality of defense items delivered.

Earlier on the same day, Trump shared similar sentiments on Truth Social, mentioning that he had been informed by the Department of War that Raytheon, a major defense contractor, has been the least responsive to the department’s needs.

Raytheon is a subsidiary of the defense contractor RTX.

TRUMP ANNOUNCES PLANS TO BAN INSTITUTIONAL INVESTORS FROM BUYING SINGLE-FAMILY HOMES

President Donald Trump and the Pentagon have criticized the defense industry for what they describe as high costs and slow production. (Getty Images / Getty Images)

Following Trump’s statements, defense stocks experienced a decline, reversing recent gains that had come after the U.S. military’s use of military equipment in operations against Venezuela, including the capture of President Nicolás Maduro and his wife.

During afternoon trading in New York, shares of defense giant Lockheed Martin fell by 4.8%, Northrop Grumman slid 5.5%, and General Dynamics dropped 3.6%. RTX shares initially decreased by 2% but later recovered, climbing 2.5% in after-hours trading.

According to the executive order, within 30 days, Pentagon chief Pete Hegseth will identify underperforming defense contractors that have engaged in stock buybacks. Hegseth will then engage with these companies, allowing them to submit a remediation plan for Pentagon review within 15 days of notification.

If Hegseth finds the remediation plan inadequate, further actions may be taken to secure remedies, including enforcement actions.

Pentagon chief Pete Hegseth will identify defense contractors who are underperforming on their contracts that have engaged in stock buybacks. (Getty Images / Getty Images)

GET FOX BUSINESS ON THE GO BY CLICKING HERE

Within two months, Hegseth is tasked with ensuring that any future defense contracts include provisions that ban stock buybacks for underperforming firms. Additionally, the Secretary will ensure that executive compensation for contractors is not linked to short-term financial metrics, such as free cash flow or earnings per share driven by stock buybacks, but rather to on-time delivery.

The order also directs the U.S. Securities and Exchange Commission to consider regulations to implement these proposed restrictions.

Reuters contributed to this report.