Yes. If you are able to hold your baby, you can do skin-to-skin. Tiny babies on breathing machines, IVs, and heart monitors can often be held skin-to-skin. In fact, they often do better in this position: their heart rate, breathing and temperature are more stable.
Most dreaming occurs during the fourth stage of sleep, known as rapid eye movement (REM) sleep. REM sleep is characterized by eye movement, increased respiration rate and increased brain activity. The American Sleep Foundation suggests that people spend approximately 20 percent of their total sleep in this stage.
Rapid eye movement sleep has since its discovery been closely associated with dreaming. Waking up sleepers during a REM phase is a common experimental method for obtaining dream reports; 80% of neurotypical people can give some kind of dream report under these circumstances.