Quote Originally Posted by samdaman View Post
thanks harvey and born, both posts very helpful.

What you've both cleared up for me is that by no real reason should a share price actually converge to a theoretical value. It was just boggling my brain that the only reason it would move is because of investors expectations that a share would move up. I'm used to buying things that have a use whereas I find it hard to believe that a company that doesn't pay dividends could be appealing beyond "it may move up one day", really shows I've got lots to learn.

I'm checking out some spreadsheets at the moment, but it might take me some time to figure these things out, wowzas it was confusing.

thanks again though this has given me a solid base to continue further learning
Companies choose not to pay dividends for all sorts of reasons. Generally they boil down to two main reasons though.

- First is the company is growing or thinks the shareholders will benefit more from keeping the money and investing it for the shareholder. If the company is making 20% return on its capital, I would much prefer them to keep the money and invest it for me at 20% than them to pay it out to me so I can keep it in a savings account earning 3% interest.

- Second is the company isn't doing too well and can't afford to pay dividends because they are losing money every year and need the money so they don't go bankrupt