Senate NDAA Proposal Imposes Sweeping Buyback, Dividend Ban on Defense Contractors
All publicly traded, private equity-backed, and pass-through U.S. defense contractors must evaluate exposure to a proposed categorical ban on stock buybacks and dividends as a condition of Department of War contract eligibility.
The Senate’s FY2027 National Defense Authorization Act includes Section 815, a provision that would prohibit the Secretary of War from awarding procurement contracts to any defense contractor that conducts stock buybacks or pays dividends, with waivers only available for contractors with approved qualifying defense investment plans. Unlike a prior executive order restricting distributions only for underperforming contractors, this rule applies categorically to all defense contractors regardless of performance, contract value, or program criticality, with no dollar threshold. It also bars parent companies of defense contracting subsidiaries from conducting buybacks, and imposes penalties including payment suspension and contract termination for violations. The House-passed NDAA does not include a matching provision, so the rule’s future will be determined in conference committee negotiations.