Europe’s top defense firms set for record $5 billion shareholder payout in 2025

Europe’s largest defense groups are preparing to return approximately $5 billion to shareholders this year.

According to a decadal analysis conducted by Vertical Research Partners for the Financial Times, the majority of the record profits earned by Europe’s eight largest defense companies this year are being distributed in the form of higher dividends.

The research, which focuses on top defense firms while excluding Airbus due to its significant commercial activities, indicates that payouts will reach a ten-year high.

Despite these payments, the study also shows that investments in the European defense sector have increased significantly since the start of the war in Ukraine, as companies expand their production capabilities.

In contrast, shareholder returns for the six largest US defense companies—Lockheed Martin, General Dynamics, Northrop Grumman, RTX Corporation, L3Harris Technologies, and Huntington Ingalls—have begun to decline after hitting a ten-year peak in 2023.

At the same time, investments (calculated as capital expenditures and self-funded research and development as a % of sales) have also dropped slightly. Boeing was excluded due to its extensive civil aviation operations.

The sector, particularly in the US, has faced criticism over suspicions regarding whether it is investing revenues from the defense boom into ramping up production of new weaponry rather than merely spending those earnings on share buybacks.

Donald Trump has urged defense companies to invest in production and boost shareholder returns. The President is expected to discuss these issues with companies in Florida this week.

Trump’s comments follow statements made in October by US Treasury Secretary Scott Bessent, who noted that the country’s defense firms were “falling way behind on deliveries, so as their biggest customer, we may need to encourage them to do a bit more research and a bit fewer share buybacks.”

Vertical Research analyst Rob Stallard argued that the accusation that the US defense industry is underinvesting or “profiteering” is “not supported by the facts.”

“Buybacks and dividends, as a % of [US companies’] market capitalization, have nearly halved in the last two years,” Stallard said.

Vertical’s research shows that the average investment of the analyzed basket of European companies (measured as capital expenditure and R&D spending as a % of revenue) will rise to 7.9% in 2025. This figure stood at 6.4% in 2021, the year before the conflict in Ukraine began.

British BAE Systems ranked first, having paid a total of $16 billion to its shareholders since 2016. It is followed by Thales, Dassault, Rheinmetall, Leonardo, Babcock, Saab, and Hensoldt.

Public debate on this issue has remained limited in Europe so far, but some industry experts believe that governments may begin to take a closer interest given the significant spending commitments they have announced.

“If defense spending rises to a certain level well above current levels, defense becomes so important to governments that they start to care deeply about how much money you are making,” said Nick Cunningham, an analyst at Agency Partners, while also adding that the sector in Europe is “not accelerating.”

“If you are operating in a capacity-constrained environment and you are printing money and buying back shares, that will not be well-received,” the analyst remarked. “Therefore, you must announce how much you are investing with great fanfare.”