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

In a Dividend payout plan, the mutual 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. So, when this dividend is not paid out to the investor but is reinvested in the fund by way of buying fresh units at the current NAV is called Dividend Reinvestment.

Both equity as well as debt plans offer dividend to the investor from the portion of realised profit of the investment corpus. Also note that dividends are not guaranteed in dividend plans.