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AOL shares rocketed to a five-year high after the company reported stellar earnings and a special dividend. Facebook

Shares of AOL Inc. (NYSE: AOL), the No. 5 U.S. website, rocketed more than 23 percent Tuesday after reporting better-than-expected third-quarter results and announcing a mega-dividend.

At the close, AOL shares were at $43.70, up $7.89 after reporting the results. The New York-based company's market value now rosd to $4.11 biillion, a record since it was spun out from Time Warner Inc. (NYSE: TWX).

We have a lot more work to do,” said CEO Tim Armstrong, who earlier this year beat back a takeover bid by Starboard Value Management, which claimed AOL was undervalued.

Since then, Armstrong has boosted its ranking to No. 5 from No. 7, according to the latest results published by comScore Inc. (Nasdaq: SCOR) and sold a patent value exceeding $1.1 billion to Microsoft Corp. (Nasdaq: MSFT), the No. 1 software company.

As a result, AOL promised to buy back shares and pay a special dividend of $5.15 per share on Dec. 5 from the $867 million in cash it had as of Sept. 30. That's more than double the hoard on Dec. 31.

As well, AOL increased search advertising by 8 percent, including international display ads by 18 percent. As well, traffic on its Patch local-news service intended to vie for ads with regional newspapers, rose 19 percent year-over-year.

Starboard had urged closing of Patch and attacked Armstrong for acquiring other sites including the Huffington Post and Techcrunch.

Analyst Brian Pitz of Jefferies said he was impressed by the AOL report.

AOL delivered its best revenue performance and first non-negative growth quarter in eight years,” he said. Pitz also said he was impressed that AOL's video OnNetwork now ranks No. 2 behind YouTube, a service owned by Google (Nasdaq: GOOG), of Mountain View, Calif.