President Donald Trump on Wednesday said he “will not permit” defense companies to issue dividends or stock buybacks until those firms speed up their production of military equipment and address his other complaints about the industry.
Trump, in a lengthy Truth Social post, also took aim at defense contractors’ executive pay packages, calling them “exorbitant and unjustifiable.”
“Defense Companies are not producing our Great Military Equipment rapidly enough and, once produced, not maintaining it properly or quickly,” he wrote.
Until those companies build new production plants, “no Executive should be allowed to make in excess of $5 Million Dollars,” Trump declared.
Shares of General Dynamics, Lockheed Martin and Northrop Grumman each fell about 3% following Trump’s comments.
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It was not initially clear what impact or binding force, if any, Trump’s announcement would have on major defense companies’ financial activities. The White House did not immediately respond to CNBC’s request for additional information.
Trump griped in the post that “massive” shareholder dividends and buybacks were taking place “at the expense and detriment of investing in Plants and Equipment.”
“This situation will no longer be allowed or tolerated!” Trump wrote in the post, which warned the defense industry to “BEWARE.”
“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,” he wrote.
Military equipment “must be built now with the Dividends, Stock Buybacks, and Over Compensation of Executives, rather than borrowing from Financial Institutions, or getting the money from your Government,” Trump added.
While the tech industry leads the way in buybacks, defense companies have also spent big repurchasing stock 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 over that time period.
Lockheed spent $2.25 billion on stock buybacks in the nine months ended Sept. 28, while paying out $2.33 billion in dividends.
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