WASHINGTON — President Donald Trump issued an executive order today that prohibits defense companies from making share repurchases and paying dividends to shareholders, as well as places restrictions on executive compensation, unless companies make investments to modernize weapons production facilities.
“All United State Defense Contractors, and the Defense Industry as a whole, BEWARE: While we make the best Military Equipment in the World (No other Country is even close!), Defense Contractors are currently issuing massive Dividends to their Shareholders and massive Stock Buybacks, at the expense and detriment of investing in Plants and Equipment. This situation will no longer be allowed or tolerated!” Trump said today in a post on his Truth Social media platform, shortly before the EO was published on the White House website.
“Therefore, I will not permit Dividends or Stock Buybacks for Defense Companies until such time as these problems are rectified — Likewise, for Salaries and Executive Compensation. MILITARY EQUIPMENT IS NOT BEING MADE FAST ENOUGH!” he said.
The executive order formally says, “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.”
“Every firm across our economy has a right to profit from prudent investment and hard work, but the American defense industrial base also has the responsibility to ensure that America’s warfighters have the best possible equipment and weapons. These two objectives are not mutually exclusive,” the EO says.
The executive order mandates that Secretary of Defense Pete Hegseth take 30 days to review contractor performance and identify any who are falling short — from “underperforming” on relevant contracts, to failing to invest in production capacity, to “not sufficiently prioritizing United States government contracts.” If so identified, Hegseth is to work with the company to remediate the issues and, if that fails, Hegseth is to “initiate immediate actions to secure remedies” through a number of legal and regulatory channels, such as the Defense Production Act. It also suggests the government may “cease ongoing advocacy” for underperforming companies when it comes to potential deals with foreign customers.
The order also bakes in the requirement for future contracting, saying that within 60 days Hegseth will “ensure that any future contract with any new or existing defense contractor, including a renewal, contains a provision prohibiting both any stock buyback and corporate distributions” during a period of “underperformance.”
Elsewhere, the EO mandates that executive compensation be tied not to traditional financial metrics for the company, but to “on-time delivery, increased production, and all necessary facilitation of investments and operating improvements required to rapidly expand our United States stockpiles and capabilities.”
Executives, the EO says, could have their salaries capped at currently levels — presumably more flexible than Trump’s original demand on social media that CEOs not make more than $5 million.
In his social media post, Trump lists several actions he’d like to see from defense companies — namely building new production plants and speeding up maintenance and repair — but does not list specific metrics that companies must meet to regain the ability to buy back stock, increase executive compensation or pay dividends.
Singling Out One Firm
In another post on Truth Social prior to the EO, Trump took aim at one supposedly offending defense company: Raytheon, the weapon’s building arm of RTX, responsible for manufacturing products like the Patriot air and missile defense system.
Raytheon, Trump wrote, “has been 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. Raytheon seems to think this is the Biden Administration, and this is ‘business as usual,’ IT’S NOT! Either Raytheon steps up, and starts investing in more upfront Investment like Plants and Equipment, or they will no longer be doing business with Department of War.”
The president added that RTX must stop conducting stock buybacks if it wants further business with the US government.
Breaking Defense reached out to RTX as well as the five other top publicly traded defense companies for comment. RTX, Boeing, L3Harris and General Dynamics declined to comment. Lockheed Martin and Northrop Grumman did not immediately respond to the request for comment.
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Roman Schweizer, an analyst with TD Cowen, said prior to the EO’s publication that Trump’s statements could come as a surprise to industry, as Tuesday’s announcement of an agreement between Lockheed Martin and the Pentagon to triple PAC-3 production was seen as a positive sign for defense contractors.
“Ultimately, this announcement [from Trump] results in more questions than answers, and we would expect DoW to clarify the President’s intent at some point and establish definitions and benchmarks for the policy. We expect Congress to have questions about the policy as well,” he wrote in a note to investors.
In December, Schweizer wrote that implementing an EO targeting defense companies could result in “a host of regulatory and legal issues,” including on whether firms like Amazon or Microsoft could be considered defense contractors due to their contracts with the military and US intelligence agencies. In today’s note, he stated that his take remains the same.
Hegseth expressed support for the pending restrictions, posting a screenshot of the Truth Social post on X and adding the “100” emoji.
In another social post guaranteed to raise eyebrows in the defense industry, Trump said he wanted the defense budget for fiscal 2027 to be raised to $1.5 trillion — more than 50 percent its current level.
“This will allow us to build the “Dream Military” that we have long been entitled to and, more importantly, that will keep us SAFE and SECURE, regardless of foe,” the president wrote, suggesting purported revenue from his foreign tariff regime would offset the cost.
Updated on 1/7/2026 at 5:32 p.m. ET to include information from a later Trump post on Truth Social.