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4. PNM Resources

Fitch rates PNM Resources ( PNM) as one of its potential takeover targets. The Albuquerque, N.M.-based company currently carries a market cap of $1.53 billion and a dividend yield of 2.84%.

PNM resources generates, transmits and distributes electricity and has operations for the transmission, distribution and sale of natural gas in New Mexico and Texas. The company also owns 50% of an unregulated utility in Texas called Optim Energy, which is covered by the Electric Reliability Council of Texas.

In Nov. 2011, the company sold its First Choice Power unit to Direct Energy for $270 million. With the funds, PNM looked to buy back shares and pay down debt, the company said in a statement.

Fitch notes that the company operates in just two regulatory jurisdictions, which would have to approve any merger or takeover.

The company is expected to earn 13 cents a share when it reports fourth quarter earnings on Feb. 15, according to Zacks consensus estimates. PNM Resources is expected to have revenue of $1.66 billion and net profits of $93.3 million in 2011, according to Bloomberg consensus estimates. In 2012, those sales numbers are expected to fall to $1.4 billion, but profits will rise to $106 million.

Analysts give PNM Resources an average price target of $19.10 a share, an over 7% premium to the company's current share price of $17.81. For more on PNM Resources shares, see the portfolio of Cascade Investment Management, the investment vehicle for Microsoft co-founder Bill Gates.

In 2011, the company's shares gained over 36%, bolstered by the sale of its Texas business. Bernstein analyst Hugh Wynne highlighted PNM Resources as a potential takeover candidate because of its low valuation, in an Oct. 2011 research note.

Goldman Sachs analysts estimate that PNM Resources will have a compounded annual dividend growth rate of just 2% from 2010 through 2013, one of the laggards in its sector coverage.

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