President Donald Trump rattled the defense sector yesterday by signing an executive order prohibiting contractors from issuing dividends or repurchasing shares until they prioritize investments in new facilities and machinery to boost production speed and quality. He specifically targeted RTX (NYSE:RTX | RTX Price Prediction) as the most egregious violator, accusing it of favoring shareholders over military needs and warning it could lose access to future contracts unless it ramps up capital spending.
Shares of major defense firms dropped sharply in response, with declines of up to 5% during trading. However, after markets closed, Trump advocated for a $1.5 trillion defense budget in 2027, far exceeding the $901 billion allocated for 2026, which propelled after-hours gains and optimism for industry growth. Lockheed Martin (NYSE:LMT), RTX, and General Dynamics (NYSE:GD) are the three largest defense contractors and this is what Trump’s declarations mean for each.
Lockheed Martin (LMT)
Lockheed Martin is the largest defense contractor in the world, with a market capitalization of $115 billion and $73.3 billion in sales. It returned substantial capital to investors over the past two years through dividends and buybacks. In 2024, it paid $3.1 billion in dividends and repurchased $3.7 billion in shares. So far this year, dividends and buybacks totaled $2.3 billion each across the first three quarters.
Lockheed’s stock performance was steady but unspectacular: shares rose 7% in 2024 to close at $486 per share and were virtually unchanged in 2025, ending at around $484 per share.
Trump’s critique of excessive shareholder returns directly applies here, as Lockheed’s consistent buybacks and dividend hikes — marking 30 years of payments and 23 consecutive years of increases — could face restrictions until it demonstrates expanded production capacity. Yet, a $1.5 trillion military budget would significantly benefit Lockheed, given its dominance in fighter jets like the F-35 and missiles, potentially driving revenue growth from its current level by accelerating contracts and offsetting any short-term payout curbs. It reported just yesterday it saw record F-35 deliveries of 191 jets in 2025 due to strong global demand.
RTX (RTX)
RTX is the second-biggest contractor with a $249 billion market cap and sales of $86 billion. It is second to Lockheed because, where the latter derives virtually all of its revenue from government and military sales, RTX generates between 50% and 60% of its revenue from them, primarily through its Raytheon division.
The maker of the Patriot and other missile defense systems distributed hefty sums to shareholders in recent years, with dividends amounting to $3.2 billion in 2024 and buybacks of $444 million that year. In 2025, dividends reached $2.67 per share annually, with total payouts of $2.7 billion. It bought back $224 million in stock in 2024, but only $50 million worth through the first three quarters of 2025 as shares soared.
The stock’s performance has been impressive. It surged 37% in 2024 to almost $116 and another 58% in 2025 to close at $183 per share. Trump’s pointed rebuke hits RTX hardest, labeling it the “least responsive” in scaling output and the most aggressive in shareholder rewards, which aligns with its history of large buybacks, like $10 billion in 2023. This could halt its payouts and threaten contract eligibility until it invests more in facilities.
On the flip side, the proposed $1.5 trillion defense outlay would favor RTX’s missile and radar systems, likely expanding revenue and supporting long-term stock momentum despite immediate pressures. With missile systems in demand globally, RTX stands to benefit most — if Trump doesn’t exclude it from bidding.
General Dynamics (GD)
General Dynamics often runs neck-and-neck with Northrop Grumman (NYSE:NOC) for third place, but with a $93 billion market cap and $51.5 billion in sales, it is firmly the leader today. It generates almost 80% of its revenue from government contracts.
In the past two years, General Dynamics has returned capital to shareholders primarily through dividends, with limited buyback activity. In 2024, dividends totaled approximately $1.5 billion based on an annual payout of $5.68 per share. For 2025, the company raised its quarterly dividend progressively to $1.50 per share, resulting in an annual payout of $6.00 per share and total dividends near $1.2 billion. Share repurchases were modest, with a share buyback ratio indicating limited activity and an additional 10 million shares authorized in late 2024.
General Dynamics’ stock performance was generally strong. While shares only rose about 1.5% in 2024 to close near $263, it was followed by a 26% gain in 2025, ending around $337. Trump’s industry-wide critique of shareholder returns over production investments applies to General Dynamics, as its steady dividend increases — marking 31 consecutive years — may require redirection toward new facilities to meet compliance. However, the proposed $1.5 trillion defense budget would bolster General Dynamics’ diverse operations in submarines, combat vehicles, and IT systems, likely accelerating growth going forward.
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