Both options can convey sarcasm, but the use of quotation marks can vary based on style. Typically, double quotation marks (" ") are used in American English, while single quotation marks (' ') are more common in British English.
In your case, for American English, it would be:
Yeah, that sure is one "cute" dog.
For British English, you might see:
Yeah, that sure is one 'cute' dog.
So, you can choose either based on your audience or preference, but double quotes are the more conventional choice in American contexts.