Shares of Enbridge (ENB -1.21%) fell 7.8% in 2023, according to data provided by S&P Global Market Intelligence. While that wasn't a massive decline, it did significantly underperform the broader market, given that the S&P 500 rallied 24.2% in 2023. On a more positive note, Enbridge's high-yielding dividend helped narrow its underperformance on a total return basis (-1.1% compared to a 26.3% total return for the S&P 500).

A few factors weighed on the Canadian pipeline and utility giant last year, most notably its agreement to buy three natural gas utilities from Dominion.

Capitalizing on a once-in-a-generation opportunity

Enbridge's pipeline and utility business model helps insulate it from market conditions. That was evident again last year. Even though oil and gas prices declined, Enbridge remained on track to achieve its 2023 financial guidance.

While the weakness in the energy market likely put some downward pressure on Enbridge's stock price, that wasn't the main factor driving its decline. Shares took a notable step back in September after the company revealed it was acquiring three natural gas utilities from Dominion for $14 billion. That was largely because Enbridge opted to issue 4.6 billion Canadian dollars ($3.4 billion) in stock to pre-fund that deal, which will dilute existing investors in the near term.

The company believes the deal was too good to pass up. CEO Greg Ebel commented in the press release unveiling the transaction that "adding natural gas utilities of this scale and quality, at a historically attractive multiple, is a once-in-a-generation opportunity." It's paying 1.3 times enterprise value-to-rate base and 16.5 times price-to-earnings. Given those multiples, the deal will be accretive to its adjusted earnings and distributable cash flow per share in the first year.

Meanwhile, the transaction will add to the company's growth profile over the next three years as it invests CA$1.7 billion ($1.3 billion) annually to expand those operations. The acquisition will also reduce the company's risk profile by increasing its earnings from the very stable natural gas distribution sector.

The deal will further enhance Enbridge's ability to achieve its target of delivering 5% earnings growth over the medium term. It also increases its ability to continue raising its dividend. Enbridge has already announced plans to boost its payout by 3.1% for 2024, which will be its 29th consecutive year of dividend increases.

Is Enbridge a buy after last year's slump?

Enbridge's sell-off in 2023 has made its stock cheaper while increasing its dividend yield to its current level of 7.3%. With earnings projected to grow by 5% annually over the medium term, Enbridge could generate a 12% average annual total return from here.

Meanwhile, there's additional upside potential if the company's valuation multiple recovers from last year's decline. That potential of earning a high total return from such a low-risk stock makes Enbridge look like a very compelling buy after last year's slump, especially for those seeking an attractive and steadily rising income stream.