President Donald Trump said Wednesday that he “will not allow” defense companies to pay dividends or buy back stock until they accelerate production of munitions and address other grievances about the defense industry.
President Trump also criticized executive pay at defense contractors as “exorbitant and unfair” in a lengthy post on Truth Social.
“Defense companies are not producing our nation’s superior military equipment fast enough, nor are they maintaining it properly and promptly once it is produced,” he wrote.
Until these companies build new production plants, President Trump declared, “no executive should be allowed to earn more than $5 million.”
shares of general dynamics, lockheed martin and Northrop Grumman Each fell about 3% after Trump’s comments.
Trump later named raytheon as “the least responsive to the needs of the Department of the Army, the slowest to increase in volume, and the most aggressive in spending to shareholders rather than to the needs and demands of the U.S. military.”
He said the Pentagon would sever its business relationship with Raytheon unless it “intensified” its investment in plant and equipment, adding that the company could not make any more share buybacks “under any circumstances” in the meantime.
Shares of Raytheon’s parent company RTX closed 2.5% lower and fell another 2% in after-hours trading. RTX, a major defense contractor, manufactures many of the components for advanced air-to-air missiles and the F-35 fighter jet.
It was initially unclear how President Trump’s announcement would affect or constrain the financial activities of major defense companies. The White House did not immediately respond to CNBC’s request for additional information.
$GD, $LMT, $NOC stock price
In his post, President Trump complained that “huge” shareholder dividends and stock buybacks were being made “at the expense and detriment of investment in plant and equipment.”
“This situation can no longer be tolerated, it will not be tolerated!” President Trump warned the defense industry to “be careful” in a post.
“Therefore, I will not authorize dividends or stock buybacks from defense companies until these issues are resolved. The same goes for salaries and executive compensation,” he wrote.
Trump added that military equipment “must be built now with dividends, stock buybacks, and excess compensation for executives, not with loans from financial institutions or government funding.”
While the tech industry has been at the forefront of stock buybacks, defense companies have also been spending heavily on stock buybacks in recent years.
Northrop Grumman, for example, spent $1.17 billion on stock buybacks in the nine months ended Sept. 30 and paid out $964 million in dividends to shareholders during that period.
Lockheed spent $2.25 billion on stock buybacks and paid $2.33 billion in dividends in the nine months ended Sept. 28.
Northrop, Lockheed and RTX did not immediately respond to CNBC’s requests for comment on Trump’s post. General Dynamics declined to comment.
