Most mutual funds have 3 types of investment options- Dividend Payout, Dividend Reinvestment and Growth.

The Dividend Payout option is also called Dividend Plan. Thus, in a Dividend Plan, the fund pays out a portion of the investment to the investor in the form of dividends, that are declared by the Mutual Fund from time to time.

Both equity as well as debt plans offer dividend to the investor from the portion of realised profit of the investment corpus. Dividend Distribution Tax is applicable for dividend payouts.

Lots of people opt for dividend option in their investment portfolio to receive interim cash flow in their portfolio. It is important to note that dividends are not guaranteed in dividend plans.