Trump blocks defense company stock buybacks until performance improves

President Donald Trump signed an executive order Wednesday to prevent defense companies from paying dividends or buying back shares until they improve their production and delivery performance.

“Effective immediately, they are not permitted, in any manner, to pay dividends or repurchase shares, until they are able to produce a superior product, on time and within budget,” the order states.

Trump and the Pentagon have criticized the defense industry for what they describe as high costs and slow production. The administration has pledged to make changes to boost production of military equipment.

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

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“Although the United States produces the best military equipment in the world, we are not producing enough of it quickly enough to meet the needs of our military and our partners,” the statement added. “Accordingly, in these dangerous times, it is imperative that our defense contractors are held to the highest standards designed to ensure the promotion of core national interests, particularly with regard to the timeliness and quality of the defense items they deliver.”

Trump made similar remarks earlier Wednesday on Truth Social.

“I have been informed by the War Department that the defense contractor, Raytheon, has been the least responsive to the War Department’s needs,” he wrote.

Raytheon is a unit of defense contractor RTX.

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Defense stocks fell after Trump’s messages, reversing recent gains following the use of American military equipment strike Venezuela and capture its president Nicolás Maduro and his wife from this Latin American country.

Shares of defense giant Lockheed Martin fell 4.8%, Northrop Grumman fell 5.5% and General Dynamics fell 3.6% during afternoon trading in New York.

RTX shares fell 2% before recovering and climbing 2.5% after hours.

Trump’s order states that within 30 days, Pentagon chief Pete Hegseth will identify defense contractors that are not performing well on their contracts and have engaged in stock buybacks. Hegseth would then engage with these companies and give them the opportunity to submit a remediation plan for review by the Pentagon within 15 days of notification.

If Hegseth determines that a remediation plan is insufficient, steps may be taken to achieve remedies, including through enforcement action.

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Within two months, Hegseth must ensure that any future defense contract contains provisions prohibiting any share buybacks if the company fails to comply with its contract.

“Further, the Secretary will ensure that such future contracts provide that incentive compensation for contractor executives will not be tied to short-term financial metrics, such as free cash flow or earnings per share generated from stock repurchases, but will instead be tied to on-time delivery,” the order states.

The order directed the United States Securities and Exchange Commission to consider regulations to implement the proposed restrictions.

Reuters contributed to this report.