Trump blocks defense company stock buybacks until performance improves

president Donald Trump signed an executive order on Wednesday to bar defense companies from paying dividends or buying back stock until they improve production and delivery performance.

“As of now, they are not permitted in any way to pay dividends or repurchase stock, until such time as they are able to produce a superior product, on time and on budget,” the order said.

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

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

Boeing wins $8.6 billion contract to build fighter jets for the Israeli Air Force

“While the United States produces the best military equipment in the world, we are not producing enough of it fast enough to meet the needs of our military and our partners,” she added. “As a result, in these perilous times, it is essential that our defense contractors adhere to the highest standards aimed at ensuring the advancement of core national interests, including with regard to the timeliness and quality of the defense items they deliver.”

Trump made similar comments earlier Wednesday on Truth Social.

“The War Department informed me that the defense company Raytheon was the least responsive to the War Department’s needs,” he wrote.

Raytheon is a unit of defense contractor RTX.

Trump announces plans to ban institutional investors from buying single-family homes

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

Defense stocks fell after Trump’s posts, reversing recent gains after US military equipment was used to strike Venezuela and arrest its President Nicolas Maduro and his wife from the Latin American country.

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

RTX shares fell 2% before recovering and rising 2.5% in after-hours trading.

Within 30 days, Defense Secretary Pete Hegseth will identify defense contractors that are underperforming on their contracts that participated in stock buybacks, Trump’s order said. Hegseth will then engage with those companies and give them an opportunity to submit a remediation plan for review by the Pentagon within a 15-day period after notification.

If Hegseth determines that a remedial plan is inadequate, steps may be taken to secure remedies, including through enforcement actions.

Pentagon Chief Pete Hegseth will identify defense contractors that 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 will need to ensure that any future defense contracts contain provisions prohibiting any share buybacks if the company underperforms its contract.

“In addition, the Secretary should ensure that these futures contracts provide that contractors’ executive incentive compensation will not be tied to short-term financial metrics, such as free cash flow or earnings per share driven by stock repurchases, and instead will be tied to on-time delivery,” the order said.

The order directed the SEC to consider regulations to implement the proposed restrictions.

Reuters contributed to this report.