BLOG — Jan. 28, 2026
US Defense Industry Dividend Research Report
The past January 8, President Trump´s issued an executive order directing defense contractors to place production capacity, innovation and on-time delivery above shareholder payouts. According to the order, stock buybacks and “excessive corporate distributions” must not come before meeting the needs of US military contracts.
Underperforming contractors must submit a remediation plan or engage with US defense secretary. If the plan is inadequate or issues remain unresolved, the government may amend contractors, invoke the Defense Production Act or apply other enforcement measures.
Among aerospace and defense S&P 500 constituents, 10 companies that paid regular or special dividends could be impacted — nine of which are paying regular dividends — and be subject to scrutiny and potential payout risks. All 10 companies have significant orders and contracts from the US government and the Pentagon, as evidenced throughout their latest earnings calls.
The capital goods sector is the eighth-largest sector by dividend payouts in the US market. We forecast that the sector’s dividend payments will grow by 7% in 2026, reaching US$44.3 billion. Within capital goods, aerospace and defense companies weight 31% of the total payouts, and we estimate the industry’s dividends to grow by 8% in 2026.
Generally, US companies tend to be more reactive to business conditions and market or regulatory events with their buybacks. In contrast, dividend policies are typically more stable, and US companies are generally reluctant to modify them.
We believe the executive order is more likely to serve as a negotiation tool to encourage defense contractors to increase their production capacity and speed, rather than simply to prevent cash from being allocated to shareholder returns. Moreover, even in a scenario where these companies need to rebalance their capital allocation frameworks by prioritizing capital expenditures over shareholder returns, most contractors have the flexibility to first reduce or suspend buybacks before modifying their dividend policies, which are, in most cases, reliable and long-standing.
At the company level, we believe RTX Corp.’s dividend policy faces one of the highest risks. The company rarely engages in buybacks, and almost all of its shareholder returns are provided through dividends. In addition, RTX has the highest expected contribution to S&P 500 DIPs in this subsector.
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