One of the top ways to collect passive income is via dividends from stocks and shares.

So it may be a good idea for me to look for good-value investments now, before any Santa rally comes along and pushes up their valuations.

For example, telecommunications company Vodafone (LSE: VOD) has a forward-looking dividend yield of around 6% for its trading year to March 2026.

But the share price has been falling for some time and that’s why it’s as low as about 70p now.

However, my biggest concern about the business is that City analysts predict declining dividends ahead. They expect a drop of about 40% this year and around 5.5% the year following.

Can the business turn itself around?

The shareholder income stream is set to reduce. But dividends can also be a decent indicator regarding the health of a business. In this case then, the reading is not that good.

Nevertheless, those analysts predict normalised earnings will likely claw back over the next couple of years after collapsing by almost 50% in 2023. On top of that, operating cash flow has been steady since 2020. 

In mid-November, Vodafone delivered a set of half-year results in line with expectations. Chief executive Margherita Della Valle said the business is going through a year of transition as it reshapes for growth.

So we may be seeing stabilisation in the enterprise with the potential for a recovery over the coming years. On a positive note, the company is in the middle of a €500m share buyback programme. So that may help to firm-up the stock price.

The dividend yield is high and there’s the potential for a turnaround here. But for the time being I’m still wary of Vodafone and plan to watch for a while longer. It would be good to see an end to the dividend slide and more-established progress in the business.

Solid cash flow

Another with a chunky dividend is British American Tobacco (LSE: BATS). With the stock near 2,968p, the forward-looking yield for 2025 is just above 8%.

The dividend record looks good with steady annual increases stretching back years. City analysts also anticipate modest single-digit percentage advances ahead. 

But the industry attracts a fair bit of regulatory scrutiny around the world focused against smoking. The business is in long-term decline.

However, this one is something of a cash-cow. The company has been doing a good job of using its steady operating cash flow to buy back its own shares. That process tends to produce rises in the per-share figures for dividends and earnings.

But unless it diversifies away from the smoking industry its growth prospects look limited. So that might be the reason the firm’s valuation has looked low for so long.

For dividend income, though, the stock has tempted me for some time. But the recent rise in the share price puts me off a bit now. It’s easy to imagine the stock drifting lower again at some point.

Once again, I find myself sitting on the fence. So this is another one for me to continue to watch for the time being rather than buying immediately.