TLDR
- Lockheed Martin stock dropped 4.82% Wednesday after Trump threatened to ban defense contractor dividends and stock buybacks
- Trump posted on Truth Social that defense companies must prioritize production over shareholder returns
- LMT shares rebounded 7% in after-hours trading following announcement of $1.5 trillion defense budget proposal
- The proposed 2027 budget represents a 50% increase from the previously discussed $1 trillion figure
- Defense stocks including Northrop Grumman, General Dynamics, and RTX followed similar trading patterns
Lockheed Martin stock tumbled 4.82% Wednesday as President Trump announced plans to restrict how defense contractors return money to shareholders.
Lockheed Martin Corporation, LMT
The stock closed at $496.87 after dropping $25.17 during regular trading. Trading volume surged to 4.5 million shares, more than triple the average daily volume.
Trump posted on Truth Social that defense companies spend too much on dividends and buybacks. He wants firms to reinvest that money into production facilities and equipment instead.
“Military equipment is not being made fast enough,” Trump wrote. He said companies should use capital currently spent on dividends, stock buybacks, and executive pay to build products faster.
The President declared such practices “will no longer be allowed or tolerated.” He criticized defense contractors for prioritizing shareholder returns over manufacturing capacity.
Defense Sector Selloff Hits Multiple Stocks
Lockheed Martin wasn’t the only defense stock hit by the announcement. Northrop Grumman fell 5.5% while General Dynamics dropped 4.18%.
RTX Corporation declined 2.45% and Huntington Ingalls fell 3.03%. The sector-wide selloff wiped billions in market value from defense contractors.
Investors worried about potential restrictions on capital allocation. Defense companies have historically returned cash to shareholders through dividends and buyback programs.
Lockheed Martin currently pays a 2.69% dividend yield. The company has a market capitalization of $115 billion.
Trump Proposes $1.5 Trillion Defense Budget
Hours later, Trump reversed the stock decline with a new announcement. He proposed a $1.5 trillion defense budget for 2027.
This represents a major increase from the $1 trillion figure previously discussed. Trump said the larger budget would build a “Dream Military” and keep America safe.
Lockheed Martin stock jumped 7% in after-hours trading. Northrop Grumman gained 4% while General Dynamics climbed 4.6%.
RTX added 2% and Huntington Ingalls rose 2%. The after-hours rally erased most of Wednesday’s losses.
Trump suggested tariff revenue would fund the increased military spending. He said the money would also help reduce national debt.
Questions About Presidential Authority
Trump doesn’t have unilateral authority to ban dividends or stock buybacks. Such changes would require Congressional approval and likely face legal challenges.
Defense company executives and shareholders would oppose restrictions on capital returns. Politicians from both parties might resist changes affecting a major American industry.
The whipsaw trading pattern shows market sensitivity to Trump’s defense policy statements. Investors are trying to interpret what actual policy changes might occur.
Lockheed Martin’s 52-week range sits between $410.11 and $538.73. The stock trades below its 52-week high after Wednesday’s volatile session.
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