Prosecutor Stephen Devlin said police were called after the dog went missing on April 6.
Its owner, a farmer, recalled seeing Walton's car on the property earlier that day.
Walton pleaded guilty to theft of the dog, bestiality, and possessing a drug of dependence relating to cannabis found in the caravan when police arrived to rescue the dog.
Devlin said Walton had previously been to the neighbouring property to go fishing.
"The dog is friendly and would go to any person, and the dog is familiar with the accused from his past visits," he said.
When police arrived Walton's "clothes were covered in what appeared to be dog hair", the court heard.
Judge Trevor Wraight said on Monday that Walton had only been out of jail for a few months after a sentence for similar offences involving dogs when the bestiality occurred.
Defence lawyer Philip Skehan said his actions had not made him a popular man, and he had been bashed, taunted as a "dog f...er" and spat on in prison.
"He's vilified in his community in Shepparton and he's vilified in jail," he said.
He asked Judge Wraight to consider a community corrections order with treatment instead of another jail sentence.
"Unfortunately, for the community and for him, he was liberated without any support," he said.
"Part of his reoffending was due to a lack of rehabilitation programs available to him."
He said Walton had an "unremarkable" childhood but had been a "loner for the whole of his life".
Judge Wraight said it was "very serious cruelty to an animal".
Walton will be sentenced on Friday.
