In some cases people aren't ready for democracy. For example, Uganda has elections and multiple parties but it executes gay people. The optimal dictatorship would depend upon the circumstances for the country in question. But at the very basic it would mean for instance the US shouldn't prop up homophobic, racist, sexist, or religiously bigoted dictators. Any such dictators the US should seek to undermine while searching for the right guy or right clique that vows to enforce against religious extremism and bigotry at the very least to prevent such things from becoming law and possibly with speech restrictions if public opinion is that bad that it requires such controls. I'm not generally for restrictions on free speech but some countries aren't ready for that either.
It is ethical for the West to sanction dictatorships in order to put pressure on them. Sanctions are an important way for the West to deal with dictatorships without resorting to armed conflict. Sanctions have been an effective tool to keep Iran from developing its nuclear program which threatens world safety.
Unfortunately, the overwhelming majority of dictatorships in the world today oppress their citizens and cause nothing but mayhem for other countries. The West is completely justified in sanctioning these countries in various ways. We shouldn't allow them to continue on their current path of terrible leadership and unjust treatment of citizens.
I think that it is completely ethical for Western countries like America to step in place of dictators and stop them from ruling their country in insane and unethically violent ways. It is our job, as one of the most powerful countries on the Earth, to keep things as good as possible.
I do not believe it is ethical for the West to sanction dictatorships. Dictatorships can be a viable government, if the leader chooses it to be. I do not think sanctions do much to influence these leaders when they are not acting properly or lack the control of their country.
Western governments like the United States and Great Britain shouldn't meddle in the foreign affairs of other countries, period end of story. Sanctioning dictatorships is horrible. Before the Iran-Iraq War of the 1980s, Saddam Hussein was given the key to the city of Detroit because he was our best hope for defeating the evil Iranian regime!