Defensive Dividends: A Bastion of Growth in a Volatile Market

Main Headlines

• Defense Dividends: The Ultimate Sign of Sector Strength
• The Industry’s Payout Power: A Testament to Financial Resilience
• Beyond Performance: Why These Defense Dividends Matter

The year 2025 has seen an extraordinary performance from the aerospace and defense industry, making it a standout sector for investors. While the broader S&P 500 Index has yielded approximately 10% in total returns, a diversified industry barometer, the SPDR S&P Aerospace & Defense ETF (XAR), has delivered a remarkable nearly 31% year-to-date. This robust growth often signals good news for shareholders: increased dividend distributions.

For those eyeing income-generating assets, several defense and aerospace companies are not only showing impressive financial results but are also significantly elevating their shareholder payouts. Below, we delve into the best 3 dividend stocks in this thriving sector that have recently announced substantial dividend hikes, with each increasing payments by 20% or more. These moves are considerably enhancing the income component of their investment appeal.

TransDigm Group (TDG): A Special Dividend Soars

Leading our selection is TransDigm Group, a firm that recently unveiled a unique and substantial dividend adjustment. On August 20th, the company’s board sanctioned a significant boost to its annual special dividend, raising it to an impressive $90 per share. This represents a notable 20% increase from the previous year’s $75 per share payout.

It’s important for investors to note that TransDigm exclusively distributes a special annual dividend rather than regular quarterly payments. Despite this structure, the stock boasts an attractive indicated dividend yield, which now stands at 6.4% following this latest increase. This comes amidst a period where its share price has appreciated by nearly 10% in 2025.

Industry analysts maintain a largely optimistic outlook on TransDigm. The consensus price target hovers just under $1,625, suggesting a potential upside of approximately 17% for its shares. Notably, the firm’s most recent special dividend is almost five times larger than the $18.50 paid in 2022, hinting at a potential trend for future increases. These factors make it one of the top 3 strong shares to consider.

Elbit Systems (ESLT): Rallying Shares and Rising Returns

Next on our list is Elbit Systems, a company that has enjoyed an exceptional run, delivering a total return of 78% in 2025. Coinciding with its latest financial report on August 13th, the company declared a new quarterly dividend of 75 cents per share.

This marks a substantial 25% increase from its prior dividend of 60 cents. The new payment is scheduled for October 27th for shareholders recorded on October 14th. The stock’s indicated dividend yield currently sits at approximately 0.65%.

Even with this being the second dividend increase within the last year, the stock’s yield has seen a considerable dip due to its soaring share price, which has climbed around 131% over the same period. Despite this impressive rally, at least one prominent Wall Street analyst from Bank of America projects further upside, with a price target of $500, implying roughly 9% additional growth. This certainly positions it among the top 3 strong shares with a compelling growth story.

Howmet Aerospace (HWM): Consistent Payout Growth

Finally, we turn to Howmet Aerospace, which has delivered a solid total return of nearly 57% in 2025. Its latest financial results, released on July 31st, showcased record revenues and profits.

In line with its strong performance, How met also announced a significant 20% increase to its quarterly dividend, bringing it to 12 cents per share. While the record date for the most recent payment has passed, investors can anticipate similar or higher payouts in upcoming quarters, as this marks the third quarterly dividend raise since early 2024.

Though dividends currently represent a smaller fraction of the stock’s overall return profile, with an indicated yield just under 0.3%, the consistent increases highlight management’s confidence and the company’s financial health. This pattern of growth confirms its place among the best 3 dividend stocks in the sector.

Defense Dividends: A Testament to Sector Strength

The willingness of these three prominent firms to significantly boost their cash distributions to shareholders clearly indicates their robust business health and optimistic outlook. These enhanced commitments are just one powerful indicator of the current strength and promising trajectory of the defense and aerospace industry.