In the last issue, we discussed the benefits of master limited partnerships (MLPs) and provided an update on three of our portfolio holdings. This time, we continue with two more–both in our Conservative Portfolio and suitable for investors looking to add an income-generating investment in the New Year.

NuStar Energy LP (NYSE: NS) operates in two businesses: providing logistics support (storage and transportation) to the US oil and liquids sector, which together provide about three-quarters of revenue; and refining and marketing asphalt. NuStar Energy LP boasts 8,420 miles of pipeline, 90 storage facilities and two asphalt refineries and a fuels refinery with a combined throughput capacity of 118,500 barrels per day. It is one of the largest US asphalt refiners and marketers and the #2 liquids terminal operator.

The shorthand way to think about NuStar used to be this: its storage and transportation operations generate reliable cash flows from fees paid by oil and oil-liquids producers for use of NuStar’s pipelines and storage facilities. These fees help support the MLP’s distribution that currently yields 9.9 percent.  Meanwhile, the asphalt business provided some growth potential, but it was more cyclical and less reliable as its profitability is based on crude oil prices (an input) and asphalt prices, which were highly sensitive to the overall strength of the US economy.

NuStar Energy’s management decided to change focus earlier this year to focus even more on its core business, because in recent quarters the asphalt business dragged down the MLP’s results quite badly. In September, the MLP sold half of its interest in the asphalt refining business for $175 million, which it used to pay down debt. We applaud the move, as it will help stabilize quarterly results while retaining an interest in a business that could perform much better in the coming years as the US economy improves and the federal government continues to fund needed infrastructure improvements.

The MLP also operates in the Netherlands Antilles, Canada, Mexico, the Netherlands, the United Kingdom and Turkey, but international operations account for only about a fifth of its income.

NuStar Energy LP’s core transportation and storage business represents a bet on oil shale, as it has excellent exposure to the growth of Bakken Shale and Eagle Ford regions. NuStar Energy LP operates both alone and in partnership with EOG Resource to transport shale oil to storage and refinery facilities in Texas and Louisiana. The company is investing heavily in this region, which we consider a wise move given its long-term potential and the global oil supply and demand picture.

Investors have soured on NuStar Energy LP over the past six months, especially after a disappointing third-quarter earnings results. We consider the selloff a buying opportunity for a high-yielding MLP with a solid strategy and high-quality assets in a growing sector. Buy NuStar Energy LP below 60.

PVR Partners LP (NYSE: PVR) is our one and only remaining MLP portfolio pick with significant exposure to coal, a commodity that seems certain to continue to suffer as power plants continue their rapid shift to inexpensive, cleaner natural gas–a trend more likely to continue rapidly given President Obama’s reelection. While we sold other coal-related securities from our portfolios, we retained PVR Partners because of its high-quality, dependable income stream and diversification.

Formerly known as Penn Virginia Resource Partners, PVR Partners owns and manages more than 890 million tons of coal reserves in Central and Northern Appalachia, the Illinois Basin and New Mexico. Significantly, PVR Partners does not mine its own coal. it leases properties to coal mining companies and receives royalties under 10- to 15-year contracts; much of the income from these contracts is guaranteed, with the only exposure to fluctuating coal prices coming from a fee on top of the minimum payment. So while we’re bearish on coal, we’re comfortable that PVR Partners’ income streams from the commodity are reliable for the foreseeable future.

About 40 percent of PVR Partners’ income comes from natural-gas gathering and processing assets that include more than 4,400 miles of pipelines and processing facilities capable of handling 495 million cubic feet of gas a day. The MLP has been investing in its Marcellus Shale gas pipelines and in the Texas and Oklahoma panhandles, where processing capacity has been constrained. We expect that these capital investments will further move PVR Partners’ focus from coal toward gas, a positive step that will help mitigate the risk of exposure to coal in the coming decade. Even if gas prices remain low, PVR Partners profits from fee-based transportation and processing based more on volume then end price.

PVR Partners’ investments may drive unit-price growth in 2013 as its revenue is expected to rise impressively as new projects come online; we also expect continued distribution growth. In short, investors who have been ho-hum on what they perceived as a play on coal may return to what is actually a high-yielding but relatively safe diversified midstream energy MLP.

Currently yielding 8.4 percent, PVR Partners’ unit price remains attractive despite a recent rally. Buy PVR Partners LP below 29.