Federated Investors shares advanced 4 percent yesterday after the Downtown investment manager said it would pay out a special dividend totaling about $275 million.

The company also authorized the repurchase of as many as 5 million additional shares of its publicly traded, Class B nonvoting stock and has arranged $140 million in additional credit to provide liquidity needed for the dividend, share repurchase and other needs.

"Federated has a strong and flexible balance sheet that positions the company to continue to pursue growth opportunities, including acquisitions," said Chief Financial Officer Thomas R. Donahue.

He said the dividend and share repurchase "will provide additional value to our shareholders."

The one-time dividend, totaling $2.76 per share, is in addition to the regular quarterly dividend of 24 cents per share Federated paid Aug. 15. The special dividend is payable Sept. 15 to shareholders of record Sept. 9.

According to Federated's latest proxy statement, Chairman John F. Donahue and other officers and directors own 14.7 million, or about 14 percent, of Federated's Class B shares. Members of the Donahue family own all 9,000 shares of Federated's Class A voting stock.

The company currently has about $135 million in available cash as well as a $200 million revolving credit facility. The share repurchase program announced yesterday does not include about 2.8 million shares it can buy back under an existing plan that expires at the end of the year.

Federated shares closed yesterday at $32.04, up $1.30. Investor concern over the stability of financial stocks has sent its stock off 22 percent this year vs. a 14 percent decline in the Standard & Poor's 500. However, Federated's money market business, which accounts for 81 percent of the $333.5 billion in assets it manages, has provided somewhat of a cushion from turmoil in the stock and bond markets.

Federated reported first half net income of $113.8 million, or $1.12 per diluted share vs. earnings of $107 million, or $1.04 per diluted share, in the first half of 2007.

Other financial stocks have suffered more because of the credit crisis. The S&P 500 index of financial stocks is off 32 percent this year.