L3Harris Technologies [LHX] last Friday posted lower sales and a steep drop in earnings in its fourth quarter due to impacts from divestitures and the ongoing COVID-19 pandemic on commercial aviation, but the company generated strong cash flows in the quarter and all of 2020 that will benefit shareholders.

Net income in the quarter slid 54 percent to $184 million, 92 cents earnings per share (EPS), from $399 million ($1.77 EPS) a year ago due to impairment charges for commercial aviation work, other COVID-related impacts, and the sale last year of the company’s security and automation business to Leidos [LDOS].

Excluding the charges and costs related to Harris Corp.’s acquisition of L3 Technologies, which resulted in the creation of L3Harris, adjusted per share earnings in the quarter were $3.14, five cents above consensus estimates.

L3Harris generated $642 million in free cash flow in the quarter and $2.7 billion for 2020 and is forecasting between $2.8 billion and $2.9 billion in 2021. The company telegraphed its strong cash generation position last Thursday when it announced a 20 percent hike in its dividend payment and a new $6 billion share repurchase program.

In 2020, L3Harris returned $3 billion to shareholders through $2.3 billion in share repurchases and $725 million in dividends. The dividend payments represent 27 percent of the free cash flow returned to shareholders and L3Harris is working toward an eventual goal of paying out 30 to 35 percent of its free cash flow in dividends.

In 2021, the company expects to return $3.1 billion in cash to shareholders through $2.3 billion in share repurchases and the remainder in dividends. The company is also planning additional divestitures this year, with any proceeds from the sales adding to the planned shareholder returns.

Sales in the quarter were down 4 percent to $4.7 billion from $4.8 billion a year ago due to the security business divestiture and COVID impacts. Organic revenue was flat in the quarter, the company said.

For all of 2020, sales increased 42 percent to $18.2 billion from the prior year, although given that the Harris and L3 merger didn’t close until July 1, 2019, the 2019 sales exclude L3’s revenue for the first six months of that year.

Net income in 2020 fell 15 percent to $1.1 billion ($5.19 EPS) from $1.3 billion ($7.90 EPS) a year ago. Adjusted earnings in 2020 were $11.60 EPS versus $10.26 in 2019.

In 2021, L3Harris is forecasting between 3 and 5 percent organic growth leading to a sales range between $18.5 billion and $18.9 billion. The company’s work in new space systems will be a key growth driver in the coming years.

Net earnings are projected to be between $9.80 and $10.11 EPS and adjusted earnings are expected to range between $12.60 and $13 EPS.

The increase in adjusted earnings this year will be driven by a lower share count followed by pension and tax benefits, cost savings synergies, which are ahead of targets, and operational improvements, all of which will more than offset slight headwinds from prior divestitures.