This article looks at the 7 Best Defense Dividend Stocks to Buy.

Military expenditure has soared this year, amid the ongoing conflicts in Ukraine and Gaza. The prospect of a war between the United States and Venezuela is also luring investors towards the sector.

The NYSE Arca Defense Index is up 41.96% year-to-date, as of the close of business on December 22, comfortably outpacing the S&P 500 Index, which has gained 17.21% during the period.

While traditional defense contractors have continued their gains, several small and mid-sized companies in the sector have also emerged as standout performers, given their expertise in affordable, next-generation military technology like AI-powered drones.

The trend has resulted in an increase in traditional contractors growing their capabilities to adapt to modern warfare through mergers and acquisitions of smaller firms in areas like artificial intelligence, communications, and cybersecurity.

Looking ahead to 2026, Morgan Stanley recently shared a bullish outlook for aerospace and defense stocks, amid rising demand that continues to beat supply.

The firm’s analyst Kristine Liwag believes that defense stocks in particular offer ‘good value’ since they are currently not reflecting the growth in the U.S. defense budget.

With that said, let’s now see some of the best dividend stocks to invest in from the defense sector.

Our Methodology

For this article, we gathered a pool of defense stocks that have been paying dividends for at least 10 consecutive years, as of the close of business on December 22. We then shortlisted the top 7 companies that had the highest number of hedge fund investors having a stake in them, based on Insider Monkey’s database of prominent hedge funds as of Q3 2025. Finally, we ranked them in ascending order based on the number of hedge funds holding positions.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).

7 Best Defense Dividend Stocks to Buy:

7. Textron Inc. (NYSE:TXT)

Number of Hedge Fund Holders: 36

Textron Inc. (NYSE:TXT) is among the 7 Best Defense Dividend Stocks to Buy. On December 11, Citigroup initiated coverage of the stock with a Neutral rating and announced a share price target of $91.

The global investment bank recently launched coverage on aerospace and defense stocks, while noting several ‘megatrends’ in the sector, which Citi believes could help at least one company reach the $1 trillion mark in market capitalization over the coming years.

As of the close of business on December 22, Wall Street analysts have a consensus Hold rating on the stock, with a one-year average share price target of $89.14, representing a slight downside potential of 2%.

Textron Inc. (NYSE:TXT) has been a consistent dividend payer for well over three decades, according to records on the company’s website. On October 22, it declared a quarterly dividend of $0.02 per common stock, which is scheduled to be paid on January 1, 2026.

In other news, on December 17, the company announced it had sold a TSUNAMI autonomous vessel to the Naval Information Warfare Center Pacific to support the naval needs of the United States, Australia, and the United Kingdom.

This follows the sale of a 24-foot TSUNAMI vessel to the Naval Surface Warfare Center Dahlgren Division back in May this year.

Textron Inc. (NYSE:TXT) manufactures products for consumers across several industries, through its six business segments: Bell, Textron Aviation, Textron eAviation, Textron Systems, Industrial, and Finance.

6. Huntington Ingalls Industries, Inc. (NYSE:HII)

Number of Hedge Fund Holders: 39

Huntington Ingalls Industries, Inc. (NYSE:HII) is among the 7 Best Defense Dividend Stocks to Buy. On December 12, Citigroup initiated coverage on the stock with a Buy rating and announced a price target of $376.

As of the close of business on December 22, Wall Street analysts have a consensus Moderate Buy rating on the stock, with a one-year average share price target of $331.33, representing a downside of 6%.

Huntington Ingalls Industries, Inc. (NYSE:HII) is considered to be a major dividend payer in the defense industry, with the shipbuilder having consistently increased its payout every year since 2013, according to information available on the company’s website. It has a dividend yield of 1.56% as of December 22.

In October, the defense contractor announced to increase its quarterly cash dividend by three cents to $1.38 per share. The amount was paid to shareholders on December 12, 2025.

In other news, on December 19, the company was chosen by the U.S. Navy to design and manufacture a new class of small surface combatant (SSC) ship. The stock market responded positively to the news, with shares surging 5% on Monday to close at $353.52.

Huntington Ingalls Industries, Inc. (NYSE:HII) is an American defense company with expertise in shipbuilding.