Shares of Enbridge (NYSE:ENB) have gotten off to a great start in 2019. After slumping along with the oil market last year, the Canadian energy infrastructure giant has bounced back roughly 20% so far in 2019. Because of that, its valuation is no longer scraping the bottom of the barrel.

However, that doesn't mean the oil pipeline company isn't an attractive stock to buy. Here's a closer look at its value proposition.

A hand drawing a scale with the words price and value on either side.

Image source: Getty Images.

Diving into the dividend

Any discussion surrounding Enbridge starts with its dividend, which currently yields 5.9%. That payout is triple the average yield of stocks in the S&P 500. While higher yields often come with higher risks, that's not the case with Enbridge.

That's because Enbridge has a low-risk business model. In 2019, 98% of its income will come from stable sources like long-term, fee-based contracts. That's one of the highest percentages in the pipeline sector and helps insulate the company from commodity price volatility. The company further supports the dividend by having a conservative payout ratio of less than 65% of its cash flow and a strong investment-grade balance sheet backed by low leverage metrics. Those factors should help Enbridge sustain its payout in both good times and bad.

A quick peek at the valuation

Enbridge is coming off a busy year. The company consolidated all its publicly traded entities, brought 7 billion Canadian dollars ($5.2 billion) in growth projects online, sold several noncore assets, and secured additional expansions. Even with all those moves, the company reaffirmed the view that it would generate roughly $3.31 per share in cash flow this year. With shares recently trading around $37 apiece, it implies that Enbridge sells for about 11.3 times cash flow.

While that's not as cheap as it was earlier in the year, it's still an attractive valuation. Pipeline companies have historically sold for around 15 times cash flow, which suggests ample upside potential exists as values improve across the sector.

Considering the growth prospects

Enbridge currently has CA$16 billion ($11.9 billion) of expansion projects underway, the bulk of which should enter service by the end of next year. Those projects should enable the company to grow its cash flow up to around $3.72 per share in 2020, a more-than-12% increase from this year's forecast. That would allow Enbridge to increase its already high-yielding dividend by another 10%.

Looking further ahead, the company estimates that it can self-fund CA$5 billion to CA$6 billion ($3.7 billion to $4.5 billion) in expansion projects per year starting in 2021. That investment level should support 5% to 7% annual growth in cash flow per share, enabling the company to increase its dividend at a similar pace. That's a solid growth rate for a company of Enbridge's massive size.

It has already secured a few of those longer-term projects, including the T-South Expansion and East-West Tie-Line that should start service in 2021. The company has a long list of potential projects beyond those in various stages of development, such as oil and gas pipelines, export terminals, and expansions at its utilities. On top of that organic growth potential, Enbridge could make additional acquisitions. With a top-notch balance sheet and improving stock price, the company has the currency to make needle-moving deals.

Verdict: Enbridge is a buy

Enbridge offers investors a well-above-average dividend that it could grow at a healthy pace over the next several years. Those dual fuels alone could support low-double-digit total annual returns for investors. Adding to that upside potential is Enbridge's cheap valuation, which could improve as the energy sector starts winning back investors who've avoided it in recent years due to all the volatility and underperformance.