Operating profit for the group rose from £1.89bn to £1.93bn, but net debt grew from £743 million to £2.71bn.
The group's order back was down from £37.2bn at the end of 2019 to £36.3bn.
Chief executive Charles Woodburn said: "Thanks to the outstanding efforts of our employees and close cooperation with our customers, suppliers and trades unions, we have delivered a strong set of results against a challenging backdrop of the global pandemic. Throughout 2020, we focused on keeping our people safe and supporting our communities, whilst continuing to deliver for our customers.
"In 2021, we will continue to drive operational performance, progress our sustainability agenda and invest in high-end discriminating technologies to meet our customers' priorities, which will ensure we are well positioned to grow the business and contribute to the economic prosperity of the countries in which we operate."
The rise in net debt followed a £1bn bond issuance to fund the UK pension scheme and the £1.7bn acquisitions of the Airborne Tactical Radios and Military Global Positioning System businesses.
The final dividend of 14.3p per share makes a total of 23.7p per share for 2020. The total of 37.5p per share for the year includes an interim dividend of 13.8p per share in respect of2019, which was originally proposed as a 2019 final dividend but subsequently deferred in the light of the pandemic.
A contract was secured to support the production of 38 Typhoon aircraft for the German Air Force, the fourth Astute Class submarine, HMS Audacious, left its Barrow site in April to begin sea trials with the Royal Navy and construction of the first two Dreadnought Class submarines continues to advance.
Delivery of the first production armoured multi-purpose vehicles took place in the second half.
BAE is looking forward to another year of top line growth with group sales expected to rise in the three to five per cent range.
BAE has a joint venture at Hadley Castle Works, Telford, known as Rheinmetall BAE Systems Land (RBSL) and specialising in land combat vehicles.