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OPERATION IRAQI FREEDOM

has entered its sixth year. It will draw $3 trillion from the public's purse before it's done, say Joseph Stiglitz, a Nobel Prize-winning economist, and Linda Bilmes, a Harvard government finance expert, in a new book. Whether that sum is fair depends on some things that are difficult to know for sure, like how much the war is to blame for higher oil prices (Stiglitz and Bilmes say $10 a barrel) and what price is fitting for the loss of a limb (not including Iraqi ones).

The Congressional Budget Office focuses on the war's more immediate costs. It puts spending on operations in Iraq and Afghanistan at $1.2 trillion through 2017 assuming a big troop drawdown by 2010, and $1.7 trillion assuming only a modest one by 2013. The lesser of those amounts is $10,000 per American household and more than $100,000 per Iraqi one.

This has had a remarkable impact on overall national security spending. In 2008 dollars, yearly outlays now trump peaks reached during the Korean and Vietnam conflicts, and amount to three-quarters the peak reached during Wold War II, which called on 10 times the number of troops. Accordingly, the stock value of America's big defense contractors has swelled, on average, more than 150% in five years, about triple the broad market's gain. This column, which tries in earnest to focus on stock returns and not politics, has steered readers toward shares of Raytheon, Northrop Grumman and several smaller military suppliers in recent years, and to profitable end. Few picks have done better than L-3 Communications. We singled it out at $42 in June 2003 and called attention to its still-modest valuation at $80 a share in May 2006. Today the stock fetches $111, and L-3 has become the nation's sixth-largest defense contractor.

L-3 is headquartered, not a quick car ride from the nation's capital and Pentagon as many defense contractors are, but in New York City. That makes sense; it's essentially a holding company for acquisitions. The company was founded 11 years ago by Frank Lanza and Robert LaPenza, using money from Lehman Brothers (hence, "L-3"). It started with a purchase of 10 companies that Lockheed Martin, busy digesting its year-old purchase of Martin Marietta, decided it could do without. That purchase and many since have payed off. Over the past decade L-3 has soared eightfold in value, while Lockheed Martin has not quite doubled.

Today L-3 leaves the construction of big-ticket items like ships and planes to larger companies, focusing instead on choice bits of such projects. It sells surveillance and communications systems, oversees the maintenance and modernization of existing planes and sells specialized items, like training systems. It also provides emergency support services and personnel, like translators.

The company's pace of acquisitions is slowing. In its fourth quarter, 11 percentage points of its 12% sales growth came from within. This year sales are only seen increasing 3%, but profits are forecast to climb 10%. L-3 spends liberally on stockholders. It bought back $211 million worth of shares in its fourth quarter, and looks likely to have spent at least that much in its first quarter. The stock's dividend yield, even after its rapid ascent, is a healthy 1.6%. It goes for 17 times this year's earnings forecast, only a little more than the average stock. Those numbers and others earned the company a spot recently on SmartMoney's Not Just Income Screen. It looks for companies that combine ample dividends with plenty of potential for share-price gains. Use the full list of criteria along with SmartMoney's stock screener to run the search for yourself. It recently produced eight survivors in all.

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Data as of April 9, 2008

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