Elan has said it will give shareholders 20% of the royalty rights for multiple sclerosis drug Tysabri.
The move is an effort to stave off an approach for the company by US investment firm Royalty Pharma.
US-based Royalty made its $6.6 billion approach last week.
This was just two weeks after Elan said it had sold its 50% interest in Tysabri for $3.25 billion plus future royalty payments to US partner Biogen Idec.
Elan said that the "unique" cash dividend policy would give shareholders the right to enjoy unlimited participation in the upside from Tysabri sales.
It comes on top of its decision to return $1 billion to shareholders.
Elan plans to use the rest of the cash on a series of acquisitions.
See how Elan shares performed in Dublin here.
"This provides Elan and our shareholders with significant near and longer-term benefits," Elan chief executive Kelly Martin said in a statement.
"We continue to make tangible progress on a variety of corporate development discussions and other strategic developments and anticipate providing further clarity to the marketplace in the coming days and weeks," Mr Martin added.
In the deal with Biogen, Elan's royalty payments on future Tysabri sales, which grew by 8% to $1.63 billion in 2012, will be 12% for the first year, 18% after that and 25% when annual sales rise above $2 billion.
Elan said shareholders can expect the first of twice-yearly dividend payments in the fourth quarter of 2013, subject to the closing of the Biogen deal.
The Dublin-based firm has called Royalty Pharma's proposed bid highly opportunistic because shareholders had not had the opportunity to assess the full benefit of the Tysabri sale.
Royal Pharma, which buys royalty streams of patented drugs and whose indicative approach was worth $11 per Elan share, said Elan's group's senior management had little experience making acquisitions.