Don't be scared by panic! The conflict in the Middle East has created a "golden buying opportunity". Are these two high-yield blue-chip stocks worth investing in with your eyes closed?

Since the conflict between the United States and Iran erupted at the end of February, the global energy supply chain has encountered significant disruptions, with about 20% of the supply chain needing to pass through the Strait of Hormuz, leading to a sharp increase in oil prices. Therefore, industries that are sensitive to oil and gas prices in terms of input and operating costs are expected to face pressure on shrinking profit margins, at least in the short term. The market's reaction to such situations has been as usual: panic spreading, causing a significant drop in the stock prices of high-quality blue-chip dividend stocks, including UPS and Amcor. However, in analyst Samuel Smith's view, this provides an attractive buying opportunity for long-term investors. For investors willing to ignore market noise, patiently hold onto companies with enduring competitive moats, substantial and sustainable dividends, and long-term profit margin expansion potential, now is the time to position themselves. Global logistics leader: Scale barriers and risk resilience UPS is the world's largest package delivery company, with 460,000 employees, operations covering more than 200 countries and regions, and delivering an average of about 20.8 million packages per day. Its business encompasses three main segments: U.S. Domestic, International, and Supply Chain Solutions. The healthcare business is an important part of the Supply Chain Solutions segment, generating $11.2 billion in revenue in 2025 and expected to continue growing in the future. Smith stated that with its vast scale and global coverage, UPS has an asset portfolio that is difficult to replicate, providing integrated end-to-end logistics solutions. In fact, UPS's airline is one of the largest airlines globally. Its decades of operating experience in such a vast network have accumulated a wealth of industry-specific data and formed the conditions necessary to achieve economies of scale, allowing it to leverage advances in artificial intelligence and Siasun Robot & Automation technology to further enhance efficiency, difficult for smaller competitors to reach. Packaging giant: Strategic transformation reshapes growth Meanwhile, after the recent acquisition of Berry Global, Amcor has become the world's largest consumer packaging company. The merged company has an annual revenue of about $23 billion. Amcor mainly operates in two segments: Global Flexible Packaging Solutions and Global Rigid Packaging Solutions. Its end markets are highly diversified, covering healthcare, beauty and personal care, protein foods, liquid products, food service, and pet care, among others. These core businesses contribute to most of its revenue, while the remaining non-core businesses, accounting for about $2.5 billion, are planned to be divested to concentrate growth investments on the most promising business lines. Its large scale, global presence spanning over 40 countries, along with its intellectual property, economies of scale, and deep customer relationships and proprietary industry data accumulated over decades of operation, give it a significant advantage over smaller competitors. Furthermore, it can pass most costs through contract mechanisms, helping to maintain long-term profitability. Mitigating conflicts: Cost allocation and surcharge offset Nevertheless, the conflict in Iran continues to cause short-term impacts on both companies. Smith pointed out that for UPS, the rising costs of diesel and aviation fuel, which are core expenses for its package delivery, have increased significantly. Additionally, to avoid the high-risk Middle East routes, flights are forced to take longer routes, further raising operating costs. To counteract these additional expenses, UPS has taken measures such as implementing fuel surcharges for U.S. ground, air, and ground services and imposing Middle East demand surcharges on freight to countries affected by the conflict. Therefore, while these increased costs will undoubtedly squeeze its profit margins and may affect business volume, the company can offset some of the negative effects through surcharges. Based on this, Smith believes that the market's reaction is excessive, as the decline in stock prices has exceeded a reasonable range. The analyst believes that this presents an extremely attractive buying opportunity, as even before this round of decline, UPS's valuation did not appear particularly expensive. Amcor, on the other hand, faces pressure on raw materials, as its primary raw materials for packaging production come from petroleum. As a result, the company undoubtedly faces a significant increase in input and operating costs. However, Smith noted that the good news is that Amcor adopts a cost pass-through model, and most of the increase in raw material costs will eventually be absorbed through customer contracts. However, fully recovering these costs may take several quarters, so the company's profit margins will be under pressure in the short term. Fortunately, some of its production is located within the U.S., benefiting from lower natural gas costs in the region, which also helps it resist some short-term headwinds. Efficiency improvements and performance turning points on the horizon Despite short-term disruptions, the long-term growth prospects for both companies remain promising. The past year has been particularly volatile for UPS, as the company began substantial reductions in business with Amazon.com, Inc., resulting in a decrease of about 1 million parcels delivered daily. Additionally, the company closed 93 facilities and automated processes at 57 of these facilities. The company expects these efforts to reach a turning point this year, with revenue expected to remain relatively stable, although the current conflict may cause some disruptions. Surcharges are expected to help offset the impact of a decline in business volumes, but the ultimate effect remains to be seen. Meanwhile, it is also expected that earnings per share will remain flat compared to the previous year. In the first half of the year, UPS expects its profit margin to be significantly impacted, due to the reduction in business with Amazon.com, Inc., reduced number of delivery drivers, additional costs, and other short-term cost pressures. The company anticipates a strong rebound in the second half of the year, as some of the short-term costs are expected to gradually fade away, while revenue growth with small and medium-sized business clients is expected to accelerate. Additionally, cost-saving measures implemented in the first half of the year and last year are expected to bring about total cost savings of about $3 billion for the year. Smith believes that once the adjustments are completed, UPS will operate in a more streamlined and profitable manner, continuing to invest in automation and focusing on high-growth, high-margin businesses such as healthcare, small and medium-sized businesses, business-to-business, and large enterprises. Merger synergy and unleashing free cash flow As for Amcor, thanks to significant synergies from recent mergers, the company expects its free cash flow to double this fiscal year, with an expected high single-digit to low double-digit increase in earnings per share. The realization of synergies has exceeded expectations, with $55 million in synergy benefits achieved in the last quarter, at the upper end of the guidance range, and cumulative synergy benefits of $93 million in the first half of the fiscal year. Synergy effects are expected to accelerate in the second half of the year, with an expected total synergy benefit of about $260 million for the year, and a three-year cumulative synergy target of $650 million post-merger. At the same time, the company continues to divest non-core businesses, especially the North American beverage packaging business. This will increase profit margins, recapture funds for debt reduction and growth investments, and in the future, the company plans to increase its share buyback program under the premise of significantly covering dividends with free cash flow. Regarding dividend sustainability, despite steady fundamentals, the market's main concern is whether the near 7% forward dividend yield for both companies carries a risk of dividend cuts. UPS pledged to maintain its current dividend level during its business transformation period. The company's 2026 free cash flow guidance is $6.5 billion, while the annual dividend payout plan is $5.4 billion, sufficient cash flow to cover dividends. While the Iran conflict brings uncertainty, UPS's surcharge policy and the irreplaceability of its core logistics network allow it to weather the crisis even if free cash flow is slightly lower than expected. In addition, UPS is rated A by T. Rowe Price Group and A2 by Moody's Corporation, with $6.5 billion in liquidity, and a post-adjustment debt/EBITDA ratio of only 2.5 times, demonstrating the company's solid financial position. As the management recently stated: "The dividend will remain unchanged. The current dividend payout ratio is higher than 50% of historical net profit, mainly due to the impact of the U.S. network transformation. We will not raise the dividend in 2026, but will gradually return to the target dividend level, continuing to improve cash flow and dividends. The company was an employee-owned company before 1999, and there are still many individual shareholders, dividends are crucial to investors, and we will firmly protect them. In the future, we will gradually return to a long-term dividend payout ratio of 50%-60%." Amcor, on the other hand, has been increasing its dividend for consecutive years, with a recent increase of about 2%, demonstrating confidence in dividends. The company's full-year free cash flow guidance is $1.8-1.9 billion, significantly higher than the annual dividend payout of about $1.1 billion, providing ample dividend coverage, with the remaining cash flow available for debt repayment and growth investments. In the future, the company also plans to increase its share buyback program. As mentioned earlier, UPS has a robust balance sheet, and Amcor's balance sheet is also quite strong, further enhancing confidence in dividend sustainability. While Amcor's 3.6x leverage ratio is slightly high, the company expects the ratio to decrease to 3.1-3.2 times by the end of the year. This is thanks to its strong free cash flow generation capability, which can be used to repay debt, while its profit growth naturally helps reduce leverage. Risks and volatility: Short-term disruptions do not change the long-term logic However, Smith cautioned that both investments are not without risks. The Iran conflict remains the biggest variable: UPS's business volume has decreased due to the termination of cooperation with Amazon.com, Inc., compounded by pressure on profit margins during the transformation period, and the conflict may further suppress demand; Amcor, while able to pass on costs in the long term, may see lower performance than expected in 2026, leading to a high year-end leverage ratio, pressure on short-term financial data, and even questions from the market about management and fundamentals. Moreover, rising oil prices may reduce the attractiveness of selling non-core assets, leading to delays in divestitures or lower-than-expected sale prices. UPS still needs to address union labor issues and transformation uncertainties, and it remains to be seen if the growth initiatives can achieve the expected returns; if the Middle East conflict escalates or oil prices remain high, its ability to pass on costs and maintain business volumes will face even greater challenges. Amcor needs to reverse the trend of weak or negative growth in core and developed market volumes. If high energy costs significantly weigh on the macroeconomy and lead to a recession, both companies' business volumes will come under further pressure. Investment conclusion Smith concluded that both UPS and Amcor are not without risks. However, their overall business models and core strengths make them leaders in their respective industries, with enduring and significant long-term competitive advantages. Furthermore, both companies have robust investment-grade balance sheets and are committed to distributing dividends. Benefiting from short-term headwinds, they currently offer approximately a 7% forward dividend yield for the next twelve months and contain significant long-term growth potential. In fact, analysts generally expect both companies' annualized earnings per share growth rates to be around 7.5% in the coming years. Therefore, Smith believes that the recent pullback in stock prices provides extremely attractive buying opportunities for these two stocks, especially for investors who do not believe that the Middle East conflict will persist long-term, leading to a sustained high oil price environment.