When a potion is placed in a dispenser directly facing a dirt block (or rooted dirt or coarse dirt), it automatically turns it into mud, as expected. This is the same as when a player right-clicks on a dirt block with a water bottle. A player can also turn these blocks into mud by right-clicking directly (not throwing) a splash or lingering water bottle. A dispenser doesn't do this, however. It simply throws the potion, even then placed directly in front of a dirt block.

Steps to recreate:

1) place dispenser

2) place dirt block, coarse dirt block, or rooted dirt block in front of dispenser, with no air block gaps

3) place lingering water bottle or splash water bottle in dispenser

4) activate dispenser