Building Defense Capacity Through Partnership, Not Control
By Lt Gen Norman R. Seip, USAF (Ret.)
President Trump’s recent executive order forcing large defense contractors to reduce investor returns has sparked intense debate about how to accelerate domestic production of munitions and weapons systems. The order threatens to restrict dividends, stock buybacks, and executive pay at defense companies deemed “underperforming,” tying their investor confidence and financial stability to unclear performance metrics under threat of vague enforcement action.
The 2026 National Defense Strategy’s goal of “supercharging” the defense industrial base is laudable, but temporarily micromanaging corporate financial decisions is unlikely to achieve this aim. While contractors will nevertheless scramble to meet any requirements put in place, the order completely misunderstands the defense industrial base—and threatens the critical foundation blocks of U.S. force posture.
In military jargon, the “tooth-to-tail ratio” is the idea that hundreds of technical experts, engineers, and other support personnel are needed to put a single warfighter out in the field. The same idea exists in defense production: a broad base of experts, leaders, investors, and executors are needed to deploy each round of cutting-edge defense tech. It’s no easy task, and inordinate regulations and complex military supply chains make it even harder.
Despite these limitations, the aerospace and defense industry has rapidly responded to calls for accelerated production. Last month, Lockheed Martin and the Pentagon pledged to more than triple production of PAC-3 interceptor missiles over seven years. Similarly, the Pentagon’s $3.5 billion award to RTX’s Raytheon for AMRAAM air-to-air missiles in July 2025 was the largest single award in the history of the program. During last week’s earnings calls, executives from Lockheed Martin, Northrop Grumman, RTX, L3Harris, and General Dynamics reiterated their commitments to allocating more funds to accelerating production. These long-term investments came together through collaborative partnerships and communication, not threats.
Second, the narrative that defense companies are needlessly enriching shareholders doesn’t hold up to scrutiny. The aerospace and defense industry ranks near the bottom among major sectors for capital returns, and the data simply doesn’t support the characterization of an industry excessively focused on stock buybacks or CEO salaries.
Industry Dividend Yields (Dec 2025) |
|
| Industry/Sector | Dividend Yield |
| Diversified Chemicals | 10.31% |
| Steel | 6.89% |
| Utilities (Water, Gas, Electric, Multi) | 4.2% |
| Construction Machinery/Heavy Transport Equipment | 3.66% |
| Paper and Plastic Packaging Products/Materials | 3.59% |
| Oil & Gas Exploration/Production | 3.29% |
| Automobile Manufacturers | 2.7% |
| Pharmaceuticals | 2.5% |
| Aerospace & Defense | 1.9% |
| Restaurants | 1.48% |
| Building Products | 1.3% |
| Consumer Staples Merchandise Retail | 0.83% |
| Source: eqvista | |
Dividends by Competitor |
|
| Company | 5-Year Average Dividend Yield |
| Lockheed Martin | 2.66% |
| Boeing* | 2.48% |
| RTX | 2.19% |
| General Dynamics | 2.10% |
| L3Harris | 1.98% |
| Northrop Grumman | 1.56% |
| GE Aerospace** | 0.39% |
| *Boeing has not paid dividends since 2020. This number is based on the previous period. **GE Aerospace began paying dividends after spinning off in 2024. |
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Moreover, defense contractors have unique fiscal pressures: government contracts provide revenue, but private investors provide the necessary flexibility to respond quickly in times of crisis. If government overreach scares off investors or makes defense stocks unattractive, these companies will struggle to raise the capital necessary to meet their targets and maintain the financial stability necessary for innovation between government contracts. The result would be slower, not faster, production—exactly the opposite of what the administration seeks.
Restricting dividends and stock buybacks may make for good political theater, but the Pentagon already has a detailed process for reviewing and enforcing private sector production. The Defense Production Act (50 U.S.C. 4501), Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) are hard fought and won policies that maintain clear guardrails for when a contractor is and isn’t meeting expectations. Rather than address the underlying challenges of building production capacity, these measures chip away at the foundation blocks of the defense industrial base by ignoring the policies and frameworks that support it.
The best way to improve defense production is through partnership, not punishment. Multi-year contracts that give companies confidence to invest, streamlined acquisition processes that reduce delays, and clear performance requirements from the get-go all drive better outcomes than threats of government overreach. Defense companies are committed to delivering for America’s warfighters, but they need support and predictability from Washington to make the massive capital investments required to do so at increasingly accelerated schedules.
A one-time intervention will only waste time and money in the short term while failing to ensure that government contractor expectations are aligned for the long run. What’s needed instead is a collaborative approach that recognizes the aerospace and defense industry as a strategic partner. By sticking to stable contracts, clear requirements, and strong relationships, the U.S. private sector can do what it does best: unleash the investment and innovation that keeps America at the forefront of global military power.
