Dad upset over friend’s dismay (5)
I believe the answer is:
appal
'dismay' is the definition.
('appal' can be a synonym of 'dismay')
'dad upset over friend's' is the wordplay.
'dad' becomes 'pa' ('pa' can be a synonym of 'dad').
'upset' says the letters should be written in reverse.
'over' is a charade indicator (letters next to each other).
'friend' becomes 'pal' (pal is a kind of friend**).
'pa' in reverse letter order is 'ap'.
'ap'+'pal'='APPAL'
(Other definitions for appal that I've seen before include "Cause to be unpleasantly surprised" , "Greatly dismay" , "Disgust" , "To shock, dismay" , "Shock, horrify" .)