Enbridge (ENB 1.44%) is coming off a strong year. The energy infrastructure behemoth grew its cash flow per share by 9% in 2022, fueled by strong operational performance and new investments. That gave the company the power to increase its dividend by another 3.2%, marking its 28th straight year of dividend growth.

Despite that excellent performance, shares have declined by 11% over the past year. That makes this energy stock look incredibly cheap, as the sell-off has driven Enbridge's dividend yield up over 7%.

A bottom-of-the-barrel valuation

Enbridge generated nearly 11 billion Canadian dollars ($8.1 billion), or CA$5.42 ($3.99) per share, of distributable cash flow last year, which was toward the high end of its guidance range. The company sees its cash flow rising to a range of CA$5.25 to CA$5.65 ($3.87 to $4.16) per share this year. It expects to benefit from having completed CA$4 billion ($2.9 billion) of expansion projects last year, which should help offset headwinds from lower commodity prices and higher interest rates.

With shares recently selling at around $38 apiece, Enbridge trades at less than 10 times its free cash flow and has a free cash flow yield of more than 10%. That makes it look dirt cheap compared to the broader market indexes. The S&P 500 currently trades at a 5% free cash flow yield, while the Nasdaq Composite is even more expensive at a 4% free cash flow yield.

That low valuation is why Enbridge offers such a high dividend yield. That big-time payout is on a firm foundation. The company currently has a dividend payout ratio of 65%, right in the middle of its target range. That's enabling Enbridge to retain billions of dollars in free cash flow to fund expansion projects, make acquisitions, and repurchase its dirt-cheap shares while maintaining a strong balance sheet. The company expects to end this year with a leverage ratio in the lower half of its target debt-to-EBITDA range of 4.5 to 5.0 times.

Lots more growth ahead

While Enbridge is facing some growth-related headwinds this year, the energy infrastructure giant has lots of growth ahead. It currently has CA$18 billion ($13.3 billion) of expansion projects under development. It secured CA$8 billion ($5.9 billion) of new growth projects last year to replenish its backlog. Most of those new projects will enter service in the 2026 to 2028 time frame.

The company has ample financial flexibility to fund those projects while continuing to secure new investment opportunities. Enbridge estimates it has CA$5 billion to CA$6 billion ($3.7 billion to $4.4 billion) of annual investment flexibility through a combination of postdividend free cash flow and balance sheet capacity while remaining in its target range. That gives the company ample financial flexibility to pursue additional organic growth projects, strategic acquisitions, and share buybacks. Enbridge recently renewed its CA$1.5 billion ($1.1 billion) repurchase authorization, allowing it to buy back its stock opportunistically. It can also recycle capital by selling noncore assets to further enhance its financial flexibility.

Those drivers should enable Enbridge to grow its cash flow at a mid-single-digit compound annual rate over the coming years. While it will grow more slowly in some years, like in 2023, large-scale expansion project completions and other investments will help power faster growth in other years, as happened in 2022.

The fuel to potentially produce strong total returns

Enbridge looks like an attractive value these days. It's trading at a low valuation even though it expects to continue growing at a mid-single-digit annual clip in the coming years. That should give it the power to continue increasing its 7%-yielding dividend. This combination of income and growth should enable Enbridge to produce double-digit annualized total returns, especially given its current valuation, which makes it look like a great stock for income-focused investors to buy right now.