Defence stocks face new limits on pay and dividends after Trump order

A White House executive order announced on Jan. 7 restricts defence contractors from paying dividends or buying back shares and proposes capping annual CEO pay at US$5 million; Reuters reporting says investors and some executives expressed concern while several companies said they would review or defend payout policies.

A White House executive order announced on Jan. 7 restricts defence contractors from paying dividends or buying back shares and sets an annual CEO pay limit of US$5 million. The White House framed the move as prioritizing on-time delivery of weapons to the military. Investors and some executives told Reuters they were concerned about effects on shareholder returns and the ability to attract or retain senior executives. Key facts: - The Jan. 7 executive order bars dividends and share buybacks by defence contractors until they deliver products on time and on budget, and it sets a $5 million annual cap on CEO pay. - A White House spokesperson said contractors should prioritize timely delivery and indicated there would be consequences if companies did not meet commitments. - The article mentions that RTX’s CEO said the company remains committed to its dividend, and that Northrop said it will review and approve its dividend plan when its board meets in May. - Investors and analysts told Reuters they worry the limits could affect returns, capital allocation decisions, and executive recruitment. Summary: The order increases federal influence over how defence firms use cash and has prompted concern among some investors and industry observers about shareholder returns and talent retention. Several companies said publicly they would review or defend dividend plans, and the article notes Northrop’s board meeting in May as the next scheduled review. Undetermined at this time.