TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.Buckeye Partners ( BPL) and NuStar Energy ( NS - Get Report) are limited partnerships, giving investors tax advantages that become more attractive as the price of crude oil rises. Cash distributions are paid out tax-free, and only the sale of shares prompts a tax bill from Uncle Sam. Baby boomers, in particular, should take note. Oil is hovering near a six-month high, trading at about $60 a barrel. Still, prices peaked last July at almost $150 a barrel. Only 35 of 391, or 9%, of energy stocks covered by TheStreet.com Ratings earn "buy" recommendations. Regardless of whether oil rises or falls in the short term, Buckeye Partners and NuStar Energy have stable business volumes, wide margins and yields above 8%, beating those of Chevron ( CVX - Get Report), Exxon Mobil ( XOM - Get Report), British Petroleum ( BP - Get Report) and ConocoPhillips ( COP - Get Report). Pennsylvania-based Buckeye Partners transports and stores fuel for major oil companies. It yields 8.5% -- an incredibly attractive investment for investors seeking income and tax deferral. The company's first-quarter revenue rose 10% to $417 million, and earnings per share increased 18%. Rivals simply couldn't keep up, as the oil and gas storage and transportation industry has suffered from lower crude-oil prices and weak demand stemming from the global recession. However, Buckeye Partners holds more than $1.4 billion in debt and just $17 million in cash. Shares of Buckeye Partners are trading at a slight discount based on earnings, with a price-to-earnings ratio of 12.84, compared with the peer average of 14. The stock has risen 31% this year, has a market value of about $2 billion and a beta of 0.05, indicating low market correlation. (A perfect correlation is 1.) The benchmark S&P 500 index has eked out a 2% gain so far in 2009. Moreover, Buckeye Partners has a history of regularly increasing cash distributions, even in times of economic duress.
NuStar Energy, based in San Antonio, also is in the logistics business, providing transportation, terminal and storage services. At its current price, the company offers an annual cash distribution yield of 8.04%, well above the S&P 500 dividend yield of 1.5%. NuStar's first-quarter revenue climbed 7% to $634 million, outperforming rivals. But earnings per share fell 43% and operating margins shrank. Looking at peer valuation, the shares are fairly valued based on earnings, with a price-to-earnings ratio of 13.83. But the stock remains cheap on the basis of sales, book value and cash flow. NuStar has subpar liquidity, with only $13 million in cash and nearly $2 billion of debt. Still, the stock has jumped 29% this year and, like Buckeye Partners, regularly increases its cash distributions.