TLDR
- Lockheed Martin stock fell 4.82% Wednesday after Trump threatened to ban dividends and stock buybacks for defense contractors
- Trump criticized defense companies on Truth Social for prioritizing shareholder returns over production capacity
- LMT shares surged 7% after hours when Trump proposed a $1.5 trillion defense budget for 2027
- The proposed budget is 50% higher than the previously discussed $1 trillion figure
- Other defense stocks including Northrop Grumman and General Dynamics followed similar trading patterns
Lockheed Martin stock dropped 4.82% Wednesday after President Trump proposed restricting dividends and buybacks for defense contractors.
Lockheed Martin Corporation, LMT
The stock closed at $496.87, down $25.17 from Tuesday’s close. Trading volume hit 4.5 million shares, three times the normal daily average.
Trump posted on Truth Social that defense companies waste money on shareholder returns. He wants those funds redirected to manufacturing and equipment production.
“Military equipment is not being made fast enough,” Trump wrote. He said companies must use money from dividends, buybacks, and executive pay to increase production speed.
The President declared this practice “will no longer be allowed or tolerated.” His posts targeted the entire defense industry for spending patterns he views as problematic.
Defense Stocks Drop Across Sector
The selloff hit multiple defense contractors Wednesday. Northrop Grumman fell 5.5% while General Dynamics dropped 4.18%.
RTX Corporation declined 2.45%. Huntington Ingalls fell 3.03%.
Investors worried about restrictions on capital allocation policies. Defense companies regularly return cash through dividends and buyback programs.
Lockheed Martin pays a 2.69% dividend yield. The company has a $115 billion market cap.
$1.5 Trillion Budget Proposal Reverses Decline
Trump later announced plans for a $1.5 trillion defense budget in 2027. This represents a major increase from the $1 trillion previously discussed.
Lockheed Martin stock jumped 7% in after-hours trading. The surge erased most of the day’s losses.
Northrop Grumman gained 4% after hours. General Dynamics climbed 4.6%.
RTX added 2%. Huntington Ingalls rose 2%.
Trump said the larger budget would build a “Dream Military.” He suggested tariff revenue would fund the spending increase.
The President also said the money would help reduce national debt. He promised financial benefits for moderate-income Americans.
Implementation Questions Remain
Trump lacks unilateral authority to ban dividends or buybacks. Such measures would require Congressional approval.
Defense executives and shareholders would likely oppose capital return restrictions. Politicians from both parties might resist major industry changes.
The volatile trading shows investor sensitivity to Trump defense policy statements. Markets are trying to predict actual policy outcomes versus social media posts.
Lockheed Martin trades in a 52-week range of $410.11 to $538.73. The stock sits below its recent high after Wednesday’s session.
