In Satellite - Proxy - Client configuration osad always shows offline and seeing jabberd 'dns lookup timed out' errors in /var/log/messages

Issue

• We've got a Red Hat Satellite 5.6 with 4 RHN Proxies (v5.6).
• A client registered to the Satellite via the Proxy works well except for osad which always shows offline on the Satellite. The osad logs on the Client look fine.
• The jabber related logs on the Satellite look fine as well.
• However the jabber related logs on the Proxy regularely show the following:

Jun 25 13:48:13 proxy jabberd/s2s[15158]: dns lookup for satellite.example.com timed out

• I've confirmed that DNS resolution is otherwise working fine with pings and the host command:

[root@proxy ~]# host satellite.example.com
satellite.example.com has address 10.10.116.24

• I've also added the satellite hostname in the hosts file but the result is the same, the jabber process reports DNS time out.