Recent conflicts between the US, Israel, and Iran since late February have significantly disrupted global energy supply chains. Approximately 20% of these supplies transit through the Strait of Hormuz, leading to a sharp spike in oil prices. Consequently, industries sensitive to oil and gas prices for inputs and operational costs are expected to face margin pressure, at least in the near term. The market's reaction has been typical: widespread panic has driven down the share prices of quality blue-chip dividend stocks, including United Parcel Service (UPS.US) and Amcor (AMCR.US). However, from analyst Samuel Smith's perspective, this presents a highly attractive buying opportunity for long-term investors. For those willing to ignore market noise and patiently hold companies with durable competitive moats, substantial and sustainable dividends, and potential for long-term margin expansion leading to significant growth in earnings and dividends per share, now is an opportune time to invest.
As the world's largest package delivery company, United Parcel Service employs 460,000 people and operates in over 200 countries and territories, delivering approximately 20.8 million packages daily. Its business is divided into three segments: US Domestic, International, and Supply Chain Solutions. Its healthcare business, a key part of the Supply Chain Solutions segment, generated $11.2 billion in revenue in 2025 and is poised for continued growth. Smith states that UPS's massive scale and global reach provide a unique portfolio of assets capable of delivering integrated end-to-end logistics solutions. In fact, UPS Airlines alone is one of the largest airlines globally. Decades of operating such an extensive network have accumulated vast industry-specific data and created the conditions for economies of scale, enabling UPS to leverage advancements in AI and robotics for efficiency gains at a pace smaller rivals cannot match.
Following its recent acquisition of Berry Global, Amcor has become the world's largest consumer goods packaging company, with combined annual revenue of approximately $23 billion. Amcor operates two main segments: Global Flexibles and Global Rigid Packaging. Its end markets are highly diversified, covering healthcare, beauty and personal care, protein foods, liquid products, foodservice, and pet care. These core businesses contribute the majority of its revenue, while the remaining roughly $2.5 billion in non-core assets are slated for divestment to focus growth investments on the most promising lines. Its enormous scale, presence in over 40 countries, intellectual property, economies of scale, and deep customer relationships and proprietary data from decades of operation provide a significant edge over smaller competitors. Furthermore, the company can pass through most costs via contractual mechanisms, helping protect its margins over the long term.
The Iran conflict has created short-term headwinds for both companies. Smith notes that for UPS, the costs of diesel and jet fuel—core inputs for package delivery—have surged significantly. Additionally, flights are being rerouted on longer paths to avoid high-risk zones in the Middle East, further increasing operational costs. In response, UPS has implemented measures to hedge these extra expenses, such as fuel surcharges for US ground, air, and international services, and a Middle East Demand Surcharge for shipments to affected countries. Therefore, while increased costs will pressure margins and potentially impact volume, the company can offset some of the negative impact through surcharges. Smith believes the market has overreacted, and the current stock price decline exceeds reasonable bounds, creating a compelling buying opportunity, especially as UPS's valuation was not particularly expensive even before the sell-off.
Amcor faces pressure on raw material costs, as key inputs for its packaging are petroleum-based. Consequently, the company is experiencing significant increases in input and operational costs. However, Smith highlights that Amcor employs a pass-through model, meaning most raw material cost increases are ultimately recovered through customer contracts. There might be a lag of a few quarters for full recovery, so margins will be pressured short-term. Positively, some of its production is US-based, benefiting from lower local natural gas costs, which helps mitigate some near-term challenges.
Despite short-term operational disruptions, both companies have strong long-term growth prospects. The past year has been particularly volatile for UPS as it significantly reduced business with Amazon.com (AMZN.US), cutting daily volume by about 1 million packages. Concurrently, the company closed 93 facilities and automated processes at 57 others. UPS anticipates an inflection point this year, expecting revenue to be roughly flat, although current conflicts may cause some disruption. Surcharges should help offset some volume decline, but the ultimate effect remains to be seen. Earnings per share are also expected to be flat year-over-year. In the first half of the year, UPS expects margins to be significantly impacted by costs associated with reducing Amazon volume, decreasing delivery driver numbers, and other short-term pressures. A strong margin recovery is forecast for the second half as some temporary costs abate and revenue growth from small-to-medium-sized business and enterprise customers accelerates. Furthermore, cost-saving initiatives from the first half and the previous year are expected to yield total savings of approximately $3 billion for the full year. Smith believes that after completing its adjustments, UPS will operate as a leaner, more profitable entity while continuing to invest in automation and focusing on high-growth, high-margin segments like healthcare, SMB, B2B, and large enterprise clients.
For Amcor, significant synergies from its recent acquisition are expected to double free cash flow this fiscal year, with earnings per share growth projected in the high-single to low-double-digit percentage range. Synergy realization is ahead of schedule, with $55 million achieved last quarter—at the high end of guidance—and a total of $93 million in the first half. Acceleration is expected in the second half, with full-year synergies projected at approximately $260 million, contributing to a three-year post-acquisition target of $650 million. The company continues to advance the divestment of non-core assets, particularly its North American beverage packaging business. This will improve margins, generate funds for debt reduction and growth initiatives, and potentially enable share buybacks, provided free cash flow continues to substantially cover the dividend.
A key question for the market is the sustainability of the nearly 7% forward dividend yield for both companies. UPS has explicitly committed to maintaining its current dividend during its business transformation. Its 2026 free cash flow guidance is $6.5 billion, compared to an annual dividend payout plan of $5.4 billion, indicating sufficient coverage. While the Iran conflict introduces uncertainty, UPS's surcharge policy and the irreplaceable nature of its core logistics network provide resilience, even if free cash flow falls slightly short. Furthermore, UPS boasts strong investment-grade credit ratings (S&P: A; Moody's: A2), $6.5 billion in liquidity, and a low adjusted debt/EBITDA ratio of 2.5x. As management recently stated, the dividend will remain unchanged. While the current payout ratio is above 50% of net income due to the US network transformation, the company aims to gradually return to a long-term target payout ratio of 50%-60% after 2026, consistently improving cash flow to safeguard the dividend, which is crucial for its many individual shareholders.
Amcor has raised its dividend for decades and recently increased it by about 2%, demonstrating strong commitment. Its full-year free cash flow guidance of $1.8-$1.9 billion comfortably exceeds the annual dividend payout of approximately $1.1 billion, providing ample coverage. Excess cash will be used for debt reduction and growth investments, with plans to increase share repurchases. As noted, while UPS has a robust balance sheet, Amcor's is also strong, further supporting dividend sustainability. Smith points out that although Amcor's leverage ratio of 3.6x is slightly elevated, the company expects it to decrease to 3.1-3.2x by year-end, aided by strong free cash flow generation for debt repayment and profit growth.
Smith cautions that neither investment is without risk. The Iran conflict remains the largest variable. UPS is already experiencing volume decline from the Amazon wind-down, and conflict-related pressures could further dampen demand during its margin-sensitive transformation. While Amcor can pass costs through long-term, its 2026 performance might fall short of previous expectations, potentially resulting in higher year-end leverage than guided, pressuring short-term financials and raising market concerns. Rising oil prices could also make non-core asset divestments less attractive, leading to delays or lower proceeds. UPS also faces union labor issues and transformation execution risks. If the Middle East conflict escalates, sustaining surcharge efficacy and volumes will be challenging. Amcor needs to address volume weakness or decline in its core and developed market businesses. A significant macroeconomic slowdown or recession triggered by high energy costs would further pressure volumes for both companies.
In conclusion, Smith states that while neither UPS nor Amcor is risk-free, their overall business models and core strengths make them leaders in their respective industries with durable long-term competitive advantages. Both companies possess solid investment-grade balance sheets and are committed to dividend payments. Due to short-term headwinds, they currently offer a forward twelve-month dividend yield of approximately 7%, coupled with significant long-term growth potential—analyst consensus estimates suggest annualized EPS growth of around 7.5% for both in the coming years. Therefore, Smith views the recent stock price pullback as a highly attractive entry point, particularly for investors who do not believe the Middle East conflict will persist long-term, causing sustained high oil prices.