My top financial goal is to become financially independent. I'm working toward achieving that aim by growing my passive income to match my expenses. The centerpiece of my strategy is investing in stocks that I believe pay sustainable and growing dividends.

I regularly put my money to work generating income and recently bought a few more shares of Stag Industrial (STAG -0.17%). Here's why I continue piling into the industrial REIT, which has become an excellent passive income producer.

Build on an increasingly improving foundation

Stag Industrial owns over 550 warehouses and light manufacturing facilities across the U.S. It leases these operationally critical facilities to tenants under long-term contracts. Those leases supply the REIT with steady income.

The REIT pays out about 76% of its cash available for distribution via its monthly dividend, which currently yields 4.3% (more than double the S&P 500's dividend yield of 1.6%). That reasonable payout ratio gives it a nice cushion while allowing the REIT to retain some cash flow to fund new investments. Stag Industrial currently generates about $85 million in annual free cash flow after paying dividends. That's quite the improvement from the end of 2015 when its payout ratio was around 99%.

Stag Industrial also has a strong investment-grade balance sheet. It has a low leverage ratio and primarily long-term fixed-rate debt. It has minimal near-term debt maturities. This balance sheet structure gives it lots of financial flexibility and helps insulate it from the recent surge in interest rates. Like its dividend payout ratio, Stag Industrial's balance sheet has improved over the years. Its leverage ratio has fallen from 6.4 at the end of 2015 to a much more comfortable 4.9 this year (currently below its 5.0-5.5 target range). That's given it more financial flexibility to make new investments.

Stag Industrial's high-quality portfolio, strong balance sheet, and reasonable payout ratio put its dividend on a very firm foundation.

A steady grower

Stag Industrial's strong financial profile has enabled it to steadily expand its portfolio. The REIT primarily grows through acquisition. Over the last eight years, it has acquired an average of $750 million of properties annually.

While the company will acquire income-producing operating properties, it also purchases properties with value-add upside potential. It has a multi-pronged approach to creating value, including buying properties under development, those with excess land for future development, buildings with expansion potential, and vacant properties it can lease-up. The company's value-add strategy investment typically generates higher investment returns than acquiring a fully leased operating property.

Rent growth is another driver for Stag Industrial. Its existing leases feature rental escalation clauses that increase rents by more than 2.5% annually on average. That's faster built-in rent growth than prior years, driven partly by a focus on signing leases and acquiring properties with more rental growth potential.

Meanwhile, growing demand for industrial real estate from the accelerated adoption of e-commerce and onshoring of manufacturing is driving faster market rent growth. That's enabling Stag to capture much higher rental rates when legacy leases expire, and it signs new contracts with new or existing tenants. It has signed leases at rental rates 30%+ above the prior rate of the expiring leases this year.

Stag Industrial's growth drivers are steadily increasing its cash flow. That's allowing it to raise its dividend. It has nudged up its payout each year since its initial public offering in 2011. 

The REIT's combination of built-in rent growth and continued acquisitions funded by retained cash and its strong balance sheet should enable it to continue increasing its dividend.  

It checks all the boxes

Stag Industrial is a terrific income stock. It pays a high-yielding monthly dividend that has steadily increased over the years. That should continue. The company's strong financial profile allows it to continue expanding its portfolio and shareholder payout. That high probability of a steadily rising payout is driving me to continue piling into the stock.