Record dividends for European defense firms

The majority of the European Defense Group has witnessed one of the most flourishing moments. Hence, its largest companies are set to return around $5 billion to shareholders, the highest level of dividends and share buybacks in a decade.

To clarify, the Italian defense firm Leonardo has markedly increased its dividend payout, while other major players, including Germany’s Rheinmetall and Hensoldt, France’s Thales and Dassault Aviation, Sweden’s Saab, and the UK’s BAE Systems and Babcock, are also contributing to record levels of shareholder remuneration.

This surge in payouts reflects both strong demand for military equipment and rising profitability, driven by a sustained increase in defense spending by European governments following Russia’s full-scale invasion of Ukraine since 2022.

Nevertheless, before the outbreak of the war in Ukraine, European defense companies increased the share of their revenues directed towards capital spending and research and development from approximately 6.4% to 7.9%, indicating that higher returns for shareholders have not been achieved at the cost of industrial growth.

By contrast, the situation in the U.S. is different. Following a peak in 2023, returns for shareholders of major defense firms decreased, and there was a slight drop in investment as well. The sector has faced criticism, with allegations that it is prioritizing share buybacks instead of production.

Donald Trump has urged defense contractors to allocate more resources to investment, while Treasury Secretary Scott Bessent has noted that companies are 'significantly behind in delivery' and has called for 'more research and less focus on share buybacks.

Benedetta Zimone