Know The Difference
A mutual fund generally offers two schemes: dividend and growth.
The dividend option does not re-invest the profits made by the fund though its investments. Instead, it is given to the investor from time to time.

In the growth scheme, all profits made by the fund are ploughed back into the scheme. This causes the NAV to rise over time.

The Impact on NAV
The NAV of the growth option will always be higher than that of the dividend option because money is going back into the scheme and not given to investors.

What you must know about dividends
The dividend is not guaranteed.
If a fund declared dividends twice last year, it does not mean it will do so again this year. You could get a dividend just once or you might not even get it this year.

Generally, funds whose NAV is above 10 are in a position to consider a dividend. Remember, though, declaring a dividend is solely at the fund's discretion; the periodicity is not certain nor is the amount fixed.

Which should you take?
This depends on your overall investments and income.

If you are looking at a long-term investment and are not interested in money being given to you at various intervals, the growth option is meant for you.

If you are keen on receiving an income at various intervals, opt for the dividend option.

The Tax Impact
Dividends from a mutual fund are not taxed.