AOL (AOL) revealed plans on Monday to buy back $600 million of its red-hot shares and pay a special cash dividend in an effort to return $1.1 billion to shareholders.

Wall Street cheered the news, sending shares of the New York-based Internet company rallying more than 4%.

AOL said it will pay a special one-time cash dividend of $5.15 a share on December 14 to shareholders of record as of December 5.

Additionally, AOL said it plans to buy back $600 million of its own stock through a fixed-dollar collared accelerated stock repurchase agreement with Barclays (BCS). AOL said it will pay the $600 million at the start of the agreement and receive shares throughout the remainder of the year.

“Today’s announcement underscores AOL’s commitment to delivering value for our shareholders,” said AOL Chairman and CEO, Tim Armstrong. “AOL remains committed to creating and unlocking value for all shareholders through smart execution and disciplined management of our asset portfolio.”

The moves come amid a huge rally for shares of AOL, which swung back into the black last quarter with a profit of $970 million and its smallest revenue decline in seven years.

AOL's shares jumped 4.65% to $34.45 ahead of Monday’s open, putting them on pace to extend their 2012 surge of 118% and 12-month rally of nearly 130%.

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