President Trump’s proposed 2027 budget includes a significant $500 billion increase for the Department of Defense, raising military spending to $1.5 trillion. This increase, partially funded by a 10% cut in non-defense spending, is expected to benefit defense contractors substantially, with companies like Lockheed Martin and Northrop Grumman poised to gain from increased military orders amid global tensions.
Lockheed Martin, with a market cap of nearly $140 billion, boasts a record contract backlog of $194 billion and a dividend yield of 2.2%, which rises to 4.3% when factoring in buybacks. Northrop Grumman, valued at around $96 billion, has also seen a surge in revenue and maintains a strong dividend history, yielding 1.4%. For those looking for diversified exposure, the iShares U.S. Aerospace & Defense ETF offers a way to invest in over 40 defense stocks, averaging annual gains of 16% over the past decade.
As military spending ramps up, defense stocks and related ETFs could present compelling opportunities for portfolio growth in the coming years.
Source: fool.com