The defense sector is in a boom cycle, fueled by ongoing geopolitical conflicts and a defense-friendly U.S. administration. With military budgets soaring, particularly in the U.S., investors are eyeing top defence contractors poised for lucrative government contracts.
Why invest in defence stocks now?
- 1 Trump's pro-defence stance: The return of Donald Trump to the White House is expected to favour defence contractors. His administration previously increased military spending significantly, and current global tensions could push it even higher.
- 2 Geopolitical unrest: The ongoing Russia-Ukraine war has driven NATO nations to ramp up military support, leading to massive defence contracts for arms manufacturers. Meanwhile, the Israel-Hamas conflict has intensified demand for advanced defence systems and weapons. Rising tensions between China and Taiwan have also heightened security concerns, increasing the likelihood of further U.S. military aid, which could significantly benefit defence stocks.
- 3 Who will win the defence contracts? The big players in the U.S. defence sector are well-positioned to benefit from escalating defence budgets. Below are the top defence stocks expected to surge in 2025.
Top 9 U.S. defence stocks to watch in 2025
| Defense stock | Fast facts | Overview |
|---|---|---|
| Lockheed Martin (NYSE: LMT) |
Market cap: $109B
Dividend yield: 2.7% |
What they do: Lockheed Martin is the largest U.S. defence contractor, specialising in advanced fighter jets, missile defence systems, and space technology. Their key programs include the F-35 fighter jet and THAAD missile defence.
Why buy now: With increasing global defence budgets and ongoing military conflicts, Lockheed Martin’s government-backed contracts provide stability and long-term growth potential. |
| Northrop Grumman (NYSE: NOC) |
Market cap: $69B
Dividend yield: 1.7% |
What they do: Northrop Grumman is a major aerospace and defence company, specialising in nuclear deterrence (B-21 Raider bomber) and missile defence systems.
Why buy now: The company is benefiting from increased defence spending, particularly in nuclear modernisation programs, making it a solid long-term investment. |
| General Dynamics (NYSE: GD) |
Market cap: $72B
Dividend yield: 2.0% |
What they do: General Dynamics manufactures military vehicles, submarines, and aircraft, supplying the U.S. Army and Navy.
Why buy now: Rising tensions worldwide are driving demand for military hardware, and General Dynamics' increasing backlog of government contracts provides strong revenue visibility. |
| Raytheon Technologies (NYSE: RTX) |
Market cap: $170B
Dividend yield: 2.5% |
What they do: Raytheon is a leading missile defence provider and aerospace company with major defence contracts, including the Patriot missile system.
Why buy now: With the ongoing Ukraine conflict and Middle East tensions, missile defence systems are in high demand, positioning Raytheon for sustained growth. |
| Boeing (NYSE: BA) |
Market cap: $118B
Dividend yield: N/A (reinvesting in growth) |
What they do: Boeing’s defence and space division supplies military aircraft, helicopters, and missiles.
Why buy now: Boeing’s strong defence contracts, particularly for fighter jets and drones, make it an attractive stock despite recent challenges in the commercial aviation sector. |
| L3Harris Technologies (NYSE: LHX) |
Market cap: $40B
Dividend yield: 2.4% |
What they do: L3Harris specialises in military communication, surveillance, and space technology.
Why buy now: As modern warfare increasingly relies on advanced communication and cyber defence, L3Harris is well-positioned to capitalise on this trend. |
| TransDigm Group (NYSE: TDG) |
Market cap: $75B
Dividend yield: N/A |
What they do: TransDigm is an aerospace defence supplier, providing high-margin aircraft components for military applications.
Why buy now: With growing global demand for military aircraft, TransDigm’s specialised defence components ensure strong revenue growth. |
| Howmet Aerospace (NYSE: HWM) |
Market cap: $50B
Dividend yield: 0.2% |
What they do: Howmet Aerospace supplies titanium and lightweight structural components for military aircraft.
Why buy now: As next-generation fighter jets and military aircraft expand production, Howmet is a key supplier benefiting from this growth. |
| BWX Technologies (NYSE: BWXT) |
Market cap: $10B
Dividend yield: 1.3% |
What they do: BWXT is the sole provider of nuclear reactors for U.S. Navy submarines.
Why buy now: With nuclear-powered submarines playing a critical role in national defence, BWXT’s government-backed contracts provide stability and long-term revenue security. |
Top Canadian defence stocks that may benefit from increased spending
| Canadian defense stock | Fast facts | Overview |
|---|---|---|
| CAE Inc. (TSX: CAE) |
Market cap: $10B
Dividend yield: N/A |
What they do: CAE provides simulation training and mission support services for military forces worldwide. The company specialises in pilot training for air forces, as well as high-tech flight simulators.
Why buy now: With increasing global demand for military pilot training and advanced simulation technology, CAE is well-positioned to benefit from long-term defence contracts. |
| MDA Ltd. (TSX: MDA) |
Market cap: $2B
Dividend yield: N/A |
What they do: MDA is a leader in space-based surveillance, satellite communications, and robotic systems used in defence and national security. The company has long-term contracts with the Canadian government and international space agencies.
Why buy now: The growing importance of space defence and satellite intelligence makes MDA a strategic investment as military budgets shift toward advanced technology and surveillance systems. |
| Magellan Aerospace (TSX: MAL) |
Market cap: $600M
Dividend yield: 3.5% |
What they do: Magellan Aerospace manufactures components for fighter jets, military helicopters, and space systems. The company supplies parts for Lockheed Martin’s F-35 program.
Why buy now: With a strong presence in the global supply chain for military aircraft, Magellan is well-positioned to benefit from increased production of the F-35 and other defence projects. |
| Bombardier Inc. (TSX: BBD.B) |
Market cap: $6B
Dividend yield: N/A |
What they do: Bombardier is a key supplier of business jets, with some models being adapted for military and surveillance applications. The company provides specialised aircraft solutions for governments and defence contractors.
Why buy now: With an increasing demand for multi-role aircraft, Bombardier’s expertise in private and defence aviation could see new military contracts in the near future. |
How to buy defence stocks
Investing in defence stocks is straightforward, but choosing the right brokerage is key. Investors can buy shares of publicly traded defence companies through a self-directed brokerage account. When selecting a brokerage, consider factors like trading fees, research tools, and available market access. Below are three top brokerages in Canada to buy defence stocks:
| Questrade | CIBC Investor's Edge | TD DIrect Investing |
|---|---|---|
|
|
|
|
Low trading fees compared to big banks
No annual account fees for registered accounts Access to U.S. and Canadian stock exchanges |
Competitive commissions for frequent traders
Strong research tools and market insights Integrated with CIBC banking for seamless transfers |
One of the largest online brokerages in Canada
Advanced trading platforms for experienced investors Strong customer support and educational resources |
| Visit Questrade | Visit CIBC | Visit TD |
Thinking about switching brokerages? Many Canadian brokerages offer cash bonuses and transfer fee rebates when you move your investment account.
Bottom Line
Defence stocks are positioned for strong growth in 2025 due to rising military spending and global conflicts.
Lockheed Martin, Northrop Grumman, and Raytheon remain top choices for long-term investors, while Canadian companies like CAE, MDA, and Magellan Aerospace present unique opportunities in defence and aerospace technology.
With Trump’s potential influence over military funding and ongoing geopolitical crises, these stocks could see significant upside.
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Tyler Wade has worked in personal finance for over 5 years writing for brands like Ratehub, Forbes, KOHO, and now Money.ca.
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